Question 1

In a periodic inventory system, when a company returns merchandise previously purchased on account, the entry to record the return would include a:
A)debit to Inventory.
B)credit to Purchase Returns and Allowances.
C)debit to Sales Returns and Allowances.
D)credit to Accounts Payable.

Accepted Answer

In a periodic inventory system, purchase returns are recorded by crediting the Purchase Returns and Allowances account, which reduces the total purchases.

Question 2

Table 5-6
The following are transactions for Latest Fashions for the month of June. $\text {June 2 Purchased $\$ 2,000$ of inventory under terms $1 / 10 , \mathrm { n } / 60$ and $\mathrm { FOB }$ shipp ing point from Trendy}$
 $\text {Manufacturing. The merchandise had cost Trendy $\$ 1,800$.}$
$\text {June 7 Returned defective merchandise to Trendy Manufacturing with invoice price of $\$ 400$.}$
$\text {June 8 Paid the freight charges on the purchase from Trendy Manufacturing in cash for $\$ 100$.}$
$\text {June 9 Sold merchandise to New Miss Store on account for $\$ 5,000$ with terms $2 / 15 , \mathrm { n } / 60 \mathrm { FOB }$ }$
$\text {shipping point. Cost of the merchandise sold was $\$ 4,000$.}$
$\text {June 10 Paid Trendy Manufacturing the balance on account.}$
$\text {June 12 Granted sales allowance of $\$ 300$ to New Miss Store for defective merchandise.}$
$\text {June 23 Collected balance owed from New Miss Store.}$
-Refer to table 5-6. Prepare the journal entries for New Miss Store for the transactions listed, assuming that New Miss Store uses a periodic inventory system.

Accepted Answer

The answer of Table 5-6
The following are transactions for Latest...

Question 3

To update the inventory records for the sale of merchandise on account under a periodic inventory system, the entry would include:
A)a credit to Inventory.
B)a debit to Accounts Payable.
C)no entry as inventory records are not updated at the time of sale.
D)a debit to Cost of Goods Sold.

Accepted Answer

Under a periodic inventory system, inventory records are not updated at the time of each sale. Instead, the inventory is physically counted at the end of the accounting period, and the cost of goods sold is calculated based on this physical inventory count.

Question 4

Under a periodic inventory system, the entries to record a $2,600 sales return of undamaged goods for a sale originally made on account, when the merchandise had a cost of $1,200, include a: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

Accepted Answer

AUnder a periodic inventory system, when goods are returned, the Sales Returns and Allowances account is debited for the sales price of the returned goods ($2,600), reflecting a reduction in revenue. The Inventory account is debited for the cost of the returned goods ($1,200), indicating the restoration of inventory that was previously sold.

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 periodic 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 periodic 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)credit 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 periodic inventory system, the seller records the return of inventory sold on account by crediting Accounts Receivable for the sales price of $250, as this reduces the amount owed by the customer.

Question 7

In a periodic inventory system, the entry to record the taking of a cash discount for the purchase of merchandise would include a:
A)credit to Purchase Discounts
B)credit to Inventory
C)debit to Purchase Discounts
D)credit to Purchase Returns and Allowances.

Accepted Answer

In a periodic inventory system, when a cash discount is taken for the purchase of merchandise, the entry includes a credit to Purchase Discounts. This account is used to track the discounts received from suppliers for early payment, reducing the cost of purchases.

Question 8

Under a periodic 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 $3,400.
D)Inventory of $1,500.

Accepted Answer

In a periodic inventory system, sales returns are recorded by debiting Sales Returns and Allowances for the amount of the return, which is $3,400 in this case.

Question 9

Table 5-6
The following are transactions for Latest Fashions for the month of June. $\text {June 2 Purchased $\$ 2,000$ of inventory under terms $1 / 10 , \mathrm { n } / 60$ and $\mathrm { FOB }$ shipp ing point from Trendy}$
 $\text {Manufacturing. The merchandise had cost Trendy $\$ 1,800$.}$
$\text {June 7 Returned defective merchandise to Trendy Manufacturing with invoice price of $\$ 400$.}$
$\text {June 8 Paid the freight charges on the purchase from Trendy Manufacturing in cash for $\$ 100$.}$
$\text {June 9 Sold merchandise to New Miss Store on account for $\$ 5,000$ with terms $2 / 15 , \mathrm { n } / 60 \mathrm { FOB }$ }$
$\text {shipping point. Cost of the merchandise sold was $\$ 4,000$.}$
$\text {June 10 Paid Trendy Manufacturing the balance on account.}$
$\text {June 12 Granted sales allowance of $\$ 300$ to New Miss Store for defective merchandise.}$
$\text {June 23 Collected balance owed from New Miss Store.}$
-Refer to table 5-6. Prepare the journal entries for Trendy Manufacturing for the transactions listed, assuming that Trendy uses a periodic inventory system.

Accepted Answer

The answer of Table 5-6
The following are transactions for Latest...

Question 10

In a periodic inventory system, the entry to record the sale of $2,000 of merchandise on account with a cost of $1,400 would include a:
A)credit to Accounts Receivable for $1,400.
B)debit to Accounts Receivable for $2,000.
C)debit to Cost of Goods Sold for $2,000.
D)credit to Inventory for $1,400.

Accepted Answer

In a periodic inventory system, the sale of merchandise is recorded by debiting Accounts Receivable for the sale amount ($2,000 in this case) to recognize the revenue earned. The cost of goods sold and inventory adjustments are made at the end of the period, not at the time of each sale.

Question 11

Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of inventory on account. The terms were 3/10, n/30. The purchase was made on February 1. On February 2, Avery returned $400 of damaged goods to the supplier and was granted an allowance. How should Avery properly record the allowance?
A) $$\begin{array} { | r | r | r | } 
\hline \text { Accounts Payable } & 400 & \
\hline \text { Purchase Returns and Allowances } & & 400 \
\hline
\end{array}$$
B) $\begin{array}{|l|l|cc|}
 \hline \text {Accounts Payable \quad\quad\quad\quad } & \text { \quad\quad9,600 }  & \text {  }\
\hline \text { Purchase Discounts } & \text {\quad\quad\quad\quad400 } & \text {  }\
\hline \text { Purchases } & \text {  } & \text { \quad\quad\quad10,000 }\
 \hline
\end{array}$

C) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 10,000 & \
\hline \text { Cash } & & 9,600 \
\hline \text { Purchase Returns and Allowances } & & 400 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 400 & \
\hline \text { Cash } & & 400 \
\hline
\end{array}$$

Accepted Answer

When Avery returns damaged goods and is granted an allowance, the correct way to record this transaction is to debit Accounts Payable and credit Purchase Returns and Allowances for the amount of the allowance, which is $400. This reflects the reduction in the amount owed to the supplier and the decrease in inventory cost.

Question 12

Table 5-6
The following are transactions for Latest Fashions for the month of June. $\text {June 2 Purchased $\$ 2,000$ of inventory under terms $1 / 10 , \mathrm { n } / 60$ and $\mathrm { FOB }$ shipp ing point from Trendy}$
 $\text {Manufacturing. The merchandise had cost Trendy $\$ 1,800$.}$
$\text {June 7 Returned defective merchandise to Trendy Manufacturing with invoice price of $\$ 400$.}$
$\text {June 8 Paid the freight charges on the purchase from Trendy Manufacturing in cash for $\$ 100$.}$
$\text {June 9 Sold merchandise to New Miss Store on account for $\$ 5,000$ with terms $2 / 15 , \mathrm { n } / 60 \mathrm { FOB }$ }$
$\text {shipping point. Cost of the merchandise sold was $\$ 4,000$.}$
$\text {June 10 Paid Trendy Manufacturing the balance on account.}$
$\text {June 12 Granted sales allowance of $\$ 300$ to New Miss Store for defective merchandise.}$
$\text {June 23 Collected balance owed from New Miss Store.}$
-Refer to table 5-6. Prepare the journal entries for Latest Fashions for the transactions listed, assuming that Latest Fashions uses a periodic inventory system.

Accepted Answer

The answer of Table 5-6
The following are transactions for Latest...

Question 13

Under a periodic 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)debit to Sales Returns and Allowances for $360.
C)debit to Sales Revenue for $360.
D)debit to Inventory for $210.

Accepted Answer

Under a periodic inventory system, the seller records the return of inventory sold on account by debiting Sales Returns and Allowances for the selling price of $360, not the cost of the inventory.

Question 14

In a periodic inventory system, cost of goods sold is determined by subtracting the ending inventory from the cost of goods available for sale.

Accepted Answer

In a periodic inventory system, the cost of goods sold is calculated by subtracting the ending inventory from the cost of goods available for sale, which includes beginning inventory plus purchases.

Question 15

Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of inventory on account. The terms were 3/10, n/30. The purchase was made on February 1. Avery paid the supplier on February 9. Which of the following journal entries properly records this payment transaction?
A) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 9,700 & \
\hline \text { Cash } & & 9,700 \
\hline
\end{array}$$
B) $\begin{array}{|l|r|r|}
\hline \text { Accounts Payable } & 9,700 & \
\hline \text { Purchase Discounts } & 300 & \
\hline \text { Purchases } & & 10,000 \
\hline
\end{array}$

C) $$\begin{array} { | l | r | r | } 
\hline \text { Accounts Payable } & 10,000 & \
\hline \text { Cash } & & 9,700 \
\hline \text { Purchase Discounts } & & 300 \
\hline
\end{array}$$
D) $$\begin{array} { | c | r | r | } 
\hline \text { Accounts Payable } & 10,000 & \
\hline \text { Cash } & & 10,000 \
\hline
\end{array}$$

Accepted Answer

Option C is correct because Avery paid within the discount period (3/10, n/30), which means they could deduct 3% of $10,000 ($300) from the payment. The journal entry shows the reduction in Accounts Payable by the full invoice amount ($10,000), the cash payment of $9,700, and the recognition of the purchase discount of $300.

Question 16

In a periodic inventory system, the entry to record the payment of shipping costs by the company buying the merchandise when the terms are FOB shipping point would include a:
A)debit to Freight In.
B)debit to Delivery Expense.
C)credit to Cost of Goods Sold.
D)credit to Freight Out.

Accepted Answer

A debit to Freight In is correct because in a periodic inventory system, shipping costs on purchases (when terms are FOB shipping point) are considered part of the cost of acquiring the inventory and are therefore added to the inventory cost.

Question 17

In a periodic inventory system, the entry to record the purchase of merchandise on account would include a:
A)debit to Accounts Payable.
B)debit to Inventory.
C)credit to Cash.
D)debit to Purchases.

Accepted Answer

In a periodic inventory system, purchases of merchandise are recorded by debiting the Purchases account, not the Inventory account.

Question 18

In a periodic inventory system, beginning inventory plus net purchases minus freight in equals cost of goods sold.

Accepted Answer

In a periodic inventory system, the formula to calculate the cost of goods sold is beginning inventory plus net purchases plus freight in minus ending inventory.

Question 19

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

Accepted Answer

In a periodic inventory system, sales are recorded by crediting Sales Revenue for the amount of the sale. The cost of goods sold is not recorded at the time of sale.

Question 20

Romeo Merchandising had the following transactions in June. Prepare journal entries for these transactions assuming Romeo uses a periodic 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.
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.
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...

Quiz 5: Merchandising Operations and the Accounting Cycle

In a periodic inventory system, when a company returns merchandise previously purchased on account, the entry to record the return would include a:

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

Under a periodic 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:

Under a periodic 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:

In a periodic inventory system, the entry to record the taking of a cash discount for the purchase of merchandise would include a:

Under a periodic 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:

In a periodic inventory system, the entry to record the sale of $2,000 of merchandise on account with a cost of $1,400 would include a:

Under a periodic 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:

In a periodic inventory system, cost of goods sold is determined by subtracting the ending inventory from the cost of goods available for sale.

Avery Supplies uses a periodic inventory system. Avery purchased $10,000 of inventory on account. The terms were 3/10, n/30. The purchase was made on February 1. Avery paid the supplier on February 9. Which of the following journal entries properly records this payment transaction?

In a periodic inventory system, the entry to record the payment of shipping costs by the company buying the merchandise when the terms are FOB shipping point would include a:

In a periodic inventory system, the entry to record the purchase of merchandise on account would include a:

In a periodic inventory system, beginning inventory plus net purchases minus freight in equals cost of goods sold.

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