Question 1

The entries to record a $5,000 cash sale under a perpetual inventory system, when the cost of the merchandise is $3,200, include a:
A)debit to Inventory for $5,000.
B)debit to Sales Revenue for $5,000.
C)credit to Cost of Goods Sold for $3,200.
D)debit to Cost of Goods Sold for $3,200.

Accepted Answer

In a perpetual inventory system, the cost of goods sold is debited to reflect the expense of the merchandise sold.

Question 2

Details of a purchase invoice, credit terms, and a purchase return are shown below. Assume the credit memo was received and payment made within the discount period. $\begin{array} { l r } 
\text { Cost of merchandise as shown on purchase invoice } & \$ 9,200 \
\text { Cost of merchandise returned } & 3,700 \
\text { Transportation charges, terms FOB shipping point } & 500 \
\text { Credit terms } & 2 / 10 \mathrm { n } / 30
\end{array}$ Compute the following:
a)amount of discount
b)amount paid by purchaser, within the discount period, including freight, if applicable
c)amount paid by purchaser if paid after expiration of discount including freight, if applicable

Accepted Answer

The answer of Details of a purchase invoice, credit terms,...

Question 3

Table 5-9
Reid Art Supply Company uses a perpetual inventory system. The company had the following transactions during August, 2019: $\text {Aug. 5 Purchased $\$ 2,900$ of merchandise on account; FOB shipp ing point, $3 / 15 , n / 60$.}$
$\text {Aug. 9 Paid transportation costs of $\$ 440$ for the Aug. 5 purchase.}$
$\text {Aug. 10 Returned $\$ 600$ of defective merchandise purchased on Aug. 5.}$
$\text {Aug. 15 Paid the amount owing for the merchandise purchased Aug. 5 .}$
-Record the August journal entries for Reid Art Supply.

Accepted Answer

The answer of Table 5-9
Reid Art Supply Company uses a...

Question 4

The entries to record a $4,500 sale on account under a perpetual inventory system, when the cost of the merchandise is $3,000, include a:
A)debit to Inventory for $3,000.
B)credit to Sales Revenue for $3,000.
C)debit to Sales Revenue for $4,500.
D)credit to Inventory for $3,000.

Accepted Answer

In a perpetual inventory system, when a sale is made, Inventory is credited to decrease it by the cost of goods sold, which is $3,000 in this case.

Question 5

Tobermory Merchandising had the following transactions during May:
May 5 Purchased $2,700 of merchandise on account, terms 3/15 n/60, FOB shipping point.
9 Paid transportation cost on the May 5 purchase, $250.
10 Returned $400 of defective merchandise purchased on May 5.
15 Paid for the May 5 purchase, less the return and the discount.
Required:
Assuming the perpetual inventory system is used, prepare the journal entries to record the above transactions.

Accepted Answer

The answer of Tobermory Merchandising had the following transactions during...

Question 6

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $360 with a cost of $210 would be recorded by the seller as a:
A)credit to Accounts Receivable for $210.
B)credit to Sales Returns and Allowances for $210.
C)debit to Sales Revenue for $360.
D)debit to Inventory for $210.

Accepted Answer

The correct entry involves debiting Inventory for $210 to bring the returned inventory back onto the balance sheet at its cost. This reflects the restoration of the inventory that was previously sold.

Question 7

Details of purchase invoices including shipping terms, credit terms, and returns appear below. Compute the total amount to be paid in full settlement of each invoice, assuming that credit for returns is granted before the expiration of the discount period and payment is made within the discount period. $\begin{array} { | l | l | c | c | } 
\hline \text { Invoice } & \text { Freight and Credit Terms } & \begin{array} { c } 
\text { Transportation } \
\text { Charges }
\end{array} & \begin{array} { c } 
\text { Returns and } \
\text { Allowances }
\end{array} \
\hline \text { a) } \$ 2,000 & \text { FOB destination, } 3 / 10 \mathrm { n } / 45 & \$ 55 & \$ 200 \
\hline & \text { FOB shipping point, } 2 / 10 & & \
\text { b) } \$ 5,500 & \mathrm { n } / 30 & \$ 100 & \$ 50 \
\hline & \text { FOB shipping point, } 2 / 10 & & \
\text { c) } \$ 6,700 & \mathrm { n } / 45 & \$ 200 & \$ 350 \
\hline \text { d) } \$ 9,300 & \text { FOB destination, } 2 / 10 \mathrm { n } / 60 & \$ 150 & \$ 550 \
\hline
\end{array}$

Accepted Answer

The answer of Details of purchase invoices including shipping terms,...

Question 8

To update the inventory records for the sale of merchandise under a perpetual inventory system, the entry would include a:
A)credit to Inventory.
B)debit to Accounts Payable.
C)debit to Sales Revenue.
D)credit to Cost of Goods Sold.

Accepted Answer

Under a perpetual inventory system, when merchandise is sold, the inventory account is decreased (credited) to reflect the reduction in inventory. This contrasts with a periodic inventory system, where inventory adjustments are made at the end of the accounting period.

Question 9

To update the inventory records for the sale of merchandise under a perpetual inventory system, the entry would include a:
A)debit to Inventory.
B)credit to Accounts Payable.
C)debit to Sales Revenue.
D)debit to Cost of Goods Sold.

Accepted Answer

Under a perpetual inventory system, when merchandise is sold, the cost of the goods sold is transferred from Inventory to Cost of Goods Sold. Therefore, Cost of Goods Sold is debited to reflect the increase in expense.

Question 10

Romeo Merchandising had the following transactions in June. Prepare journal entries for these transactions assuming Romeo uses a perpetual inventory system.
June 2 Romeo received an $18,000 invoice from one of its suppliers. Terms
were 2/10 n/30, FOB shipping point. Romeo paid the freight bill
amounting to $2,000.
4 Romeo returned $2,500 of the merchandise billed on June 2 because it
was defective.
5 Romeo sold $8,000 of merchandise on account, terms 3/15 n/30.
The cost of the merchandise sold was $5,100.
10 Romeo paid the invoice dated June 2, less the return and the discount.
15 A customer returned $2,500 of merchandise sold on June 5. The cost of
the returned merchandise that was placed back in inventory was $1,450.
19 Romeo received payment on the remaining amount due from the sale of
June 5, less the return and the discount.

Accepted Answer

The answer of Romeo Merchandising had the following transactions in...

Question 11

A merchandiser received payment in full within the discount period on a $5,000 sales invoice, terms 2/15 n/30. The journal entry would include a:
A)debit to Cash for $5,000.
B)credit to Accounts Receivable for $5,000.
C)credit to Accounts Receivable for $4,900.
D)credit to Sales Discounts for $100.

Accepted Answer

The answer of A merchandiser received payment in full within...

Question 12

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $250 with a cost of $185 would be recorded by the seller as a:
A)debit to Accounts Receivable for $250.
B)debit to Sales Returns and Allowances for $185.
C)credit to Sales Revenue for $250.
D)credit to Cost of Goods Sold for $185.

Accepted Answer

Under a perpetual inventory system, when inventory is returned, the seller debits Sales Returns and Allowances for the selling price ($250) and credits Accounts Receivable for the same amount. Additionally, the seller debits Inventory and credits Cost of Goods Sold for the cost of the inventory ($185).

Question 13

Under a perpetual inventory system, the entries to record a $3,400 sales return for undamaged goods on an original cash sale when the merchandise had a cost of $1,500 include a debit to:
A)Accounts Receivable of $3,400.
B)Cost of Goods Sold of $1,500.
C)Sales Returns and Allowances of $1,500.
D)Inventory of $1,500.

Accepted Answer

Under a perpetual inventory system, when a sales return occurs, the inventory account is debited to reflect the return of goods to inventory. The cost of the returned merchandise, $1,500, is added back to inventory.

Question 14

The adjusting entry to record inventory shrinkage would include a debit to the cost of goods sold account in a perpetual inventory system.

Accepted Answer

In a perpetual inventory system, inventory shrinkage is recorded by debiting the Cost of Goods Sold account and crediting the Inventory account to reflect the loss of inventory not sold.

Question 15

Table 5-10
 $\text {Sunni Brown operates a business supplying hairstyling products (Sunni's Hairstyling}$
$\text { Products) to hair salons in downtown Halifax. She offers her clients' terms of $2 / 10 , n / 30$}$
$\text { on all sales and she uses a perpetual inventory system to account for her inventory.}$
$\text { Transactions in the month of July were as follows:}$ July  $\quad $1 Purchased $\$ 24,000$ of inventory on credit $1 / 5 , n / 15$, FOB shipping point.
 $\quad $ $\quad $2 Paid the shipping fee of $\$ 500$ for the July 1st purchase.
 $\quad $ $\quad $5 Purchased supplies on credit for $\$ 350 , \mathrm { n } / 30$.
 $\quad $ $\quad $8 Sold inventory on credit to a customer for $\$ 5,600$ (cost $\$ 3,100$ ).
 $\quad $ $\quad $Sold inventory on credit to a customer for $\$ 12,300$ less a quantity discount of
 $\quad $ $\quad $$1210 \%$ (cost $\$ 6,930 )$
 $\quad $ $\quad $12 Purchased $\$ 6,500$ of inventory on credit $2 / 10$, n/30, FOB destination.
 $\quad $ $\quad $15 Returned $\$ 1,000$ of defective merchandise from the July 1st purchase
 $\quad $ $\quad $16 Paid for the July 1st purchase less the return.
 $\quad $ $\quad $18 Received payment from the sale on July 8th.
 $\quad $ $\quad $22 Received payment from the sale on July 12 th.
 $\quad $ $\quad $25 Paid the July utility bill, $\$ 250$.
 $\quad $ $\quad $30 Paid emp loyee's salary $\$ 2,200$.
-Refer to Table 5-10. Record the July transactions in the general journal.

Accepted Answer

The answer of Table 5-10
 \(\text {Sunni Brown operates a...

Question 16

Which of the following is true about freight in?
A)Freight in is added to the cost of merchandise inventory.
B)Freight in is a selling expense.
C)Freight in is an operating expense.
D)Freight in is deducted from Accounts payable.

Accepted Answer

Freight in is considered a part of the cost of purchasing inventory, so it is added to the cost of merchandise inventory to reflect the total cost of acquiring the goods.

Question 17

Michelin Jewellers completed the following transactions. Michelin Jewellers uses the perpetual inventory system. On April 2, Michelin sold $9,000 of merchandise to a customer on account with terms of 3/15, n/30. Michelin's cost of the merchandise sold was $5,500. On April 4, the customer reported damaged goods and Michelin granted a $1,000 sales allowance. On April 10, Michelin received payment from the customer. Which of the following entries correctly records the cash receipt on Michelin's books?
A) $\begin{array} { | l | r | r | } 
\hline \text { Cash } & 7,760 & \
\hline \text { Sales discount } & 240 & \
\hline \text { Accounts receivable } & & 8,000 \
\hline
\end{array}$
B) $\begin{array} { | l | r | r | } 
\hline \text { Accounts receivable } & 8,000 & \
\hline \text { Sales discount } & & 240 \
\hline \text { Cash } & & 7,760 \
\hline
\end{array}$
C) $\begin{array} { | c | r | r | } 
\hline \text { Cash } & 8,000 & \
\hline \text { Accounts receivable } & & 8,000 \
\hline
\end{array}$
D) $\begin{array} { | c | r | r | } 
\hline \text { Cash } & 7,760 & \
\hline \text { Accounts receivable } & & 7,760 \
\hline
\end{array}$

Accepted Answer

The original sale was $9,000 with a $1,000 allowance, reducing the receivable to $8,000. The customer paid within the discount period, so a 3% discount ($240) is applied, resulting in a cash receipt of $7,760.

Question 18

A merchandiser received payment in full after the expiration of the discount period on a $3,000 sales invoice, terms 3/15 n/30. The journal entry would include a:
A)debit to Cash for $2,910.
B)credit to Accounts Receivable for $2,910.
C)debit to Sales Discount of $90.
D)debit to Cash for $3,000.

Accepted Answer

The correct journal entry for receiving payment after the expiration of the discount period is to debit Cash for the full invoice amount, $3,000, since no discount applies.

Question 19

Under a perpetual inventory system, the entries to record a $2,600 sales return of undamaged goods for a sale originally made on account, when the merchandise had a cost of $1,200, include a:
A)debit to Inventory of $1,200.
B)debit to Sales Returns and Allowances of $1,200.
C)credit to Cost of Goods Sold of $2,600.
D)credit to Sales Returns and Allowances of $1,200.

Accepted Answer

The answer of Under a perpetual inventory system, the entries...

Question 20

Eastern Outfitters sold $2,500 of inventory to a customer on account, terms 3/15 n/40. Freight terms were FOB shipping point and freight charges totalled $150. The entry to record the sale would include a:
A)credit to Accounts Receivable for $2,350.
B)debit to Sales Revenue for $2,500.
C)credit to Sales Revenue for $2,500.
D)debit Accounts Receivable for $2,650.

Accepted Answer

DThe correct entries to record the sale would include a credit to Sales Revenue for the amount of the sale ($2,500) and a debit to Accounts Receivable for the total amount due from the customer, which includes both the sale amount and the freight charges ($2,500 + $150 = $2,650).

Quiz 5: Merchandising Operations and the Accounting Cycle

The entries to record a $5,000 cash sale under a perpetual inventory system, when the cost of the merchandise is $3,200, include a:

The entries to record a $4,500 sale on account under a perpetual inventory system, when the cost of the merchandise is $3,000, include a:

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $360 with a cost of $210 would be recorded by the seller as a:

To update the inventory records for the sale of merchandise under a perpetual inventory system, the entry would include a:

To update the inventory records for the sale of merchandise under a perpetual inventory system, the entry would include a:

A merchandiser received payment in full within the discount period on a $5,000 sales invoice, terms 2/15 n/30. The journal entry would include a:

Under a perpetual inventory system, the entry to record the return of inventory sold on account for $250 with a cost of $185 would be recorded by the seller as a:

Under a perpetual inventory system, the entries to record a $3,400 sales return for undamaged goods on an original cash sale when the merchandise had a cost of $1,500 include a debit to:

The adjusting entry to record inventory shrinkage would include a debit to the cost of goods sold account in a perpetual inventory system.

Which of the following is true about freight in?

A merchandiser received payment in full after the expiration of the discount period on a $3,000 sales invoice, terms 3/15 n/30. The journal entry would include a:

Under a perpetual inventory system, the entries to record a $2,600 sales return of undamaged goods for a sale originally made on account, when the merchandise had a cost of $1,200, include a:

Eastern Outfitters sold $2,500 of inventory to a customer on account, terms 3/15 n/40. Freight terms were FOB shipping point and freight charges totalled $150. The entry to record the sale would include a: