Question 1

Which of the following is a TRUE statement about sales?

Accepted Answer

Sales discounts are incentives offered to customers to encourage early payment, thus speeding up cash flow.

Question 2

Nichols Company has shipped goods to one of its customers FOB shipping point.Nichols Company will recognize sales revenue when:

Accepted Answer

Under FOB shipping point terms, the buyer takes ownership of the goods as soon as they leave the seller's shipping dock. Therefore, Nichols Company should recognize sales revenue when the goods leave their shipping dock.

Question 3

The two major types of receivables are accounts receivable and trade receivables.

Accepted Answer

The two major types of receivables are accounts receivable and notes receivable. Accounts receivable are amounts customers owe on account, while notes receivable are written promises for amounts to be received.

Question 4

On December 1,Macy Company sold merchandise with a selling price of $1,000 on account to Mrs.Jorgensen,with terms 2/10,n/30.On December 3,Mrs.Jorgensen returned merchandise with a selling price of $500.Mrs.Jorgensen paid the amount due on December 9.What journal entry did Macy Company prepare on December 9?

Accepted Answer

Macy Company would need to record the return and subsequent payment made by Mrs. Jorgensen. The journal entry would be as follows:

December 3:
Debit Accounts Receivable for $500
Credit Sales Revenue for $500

December 9:
Debit Cash for $490 (to account for the 2% discount taken by Mrs. Jorgensen for paying within the discount period)
Debit Sales Discounts for $10 (to record the discount taken)
Credit Accounts Receivable for $500 (to clear the remaining balance owed by Mrs. Jorgensen)

Therefore, choice D is the correct answer.

Question 5

If the credit terms are 2/10,n/30,the buyer can get a 2% discount if the invoice is paid within 20 days of the invoice date.

Accepted Answer

The answer of If the credit terms are 2/10,n/30,the buyer...

Question 6

By selling on credit,companies run the risk of not collecting some receivables.

Accepted Answer

Selling on credit means allowing customers to purchase goods or services without immediate payment. This increases the possibility that some customers may not pay their bills, resulting in bad debts or loss of revenue for the company.

Question 7

On December 2,a customer returned merchandise with a selling price of $500 purchased on account to a department store.Ignoring Cost of Goods Sold,what journal entry did the department store prepare?

Accepted Answer

The entry should reflect the return of merchandise, so it would be appropriate to debit Sales Returns and Allowances and credit Accounts Receivable. This reflects that the sale has been reversed and the customer's account has been credited for the returned merchandise.

Question 8

When goods are shipped FOB destination,revenue is recognized by the seller when the goods leave the seller's shipping dock.

Accepted Answer

Revenue is recognized by the seller when the goods are received by the buyer at the destination.

Question 9

If a buyer takes advantage of a sales discount,the journal entry recorded by the seller will include a(n):

Accepted Answer

When a buyer takes advantage of a sales discount, the seller needs to make a journal entry to record the transaction. This journal entry decreases the amount the seller is owed and reduces revenue. Therefore, the journal entry will include a debit to Cash (as money is being received), a debit to Sales Discount (as revenue is being reduced), and a credit to Accounts Receivable (as the buyer's balance is being decreased). Option A is incorrect because it includes a credit to Sales Discount (redundant), while option C and D do not include an account for the reduced revenue.

Question 10

On December 1,Macy Company sold merchandise with a selling price of $1,000 on account to Mrs.Jorgensen,with terms 2/10,n/30.On December 3,Mrs.Jorgensen returned merchandise with a selling price of $500.Mrs.Jorgensen paid the amount due on December 19.What journal entry did Macy Company prepare on December 19?

Accepted Answer

Mrs. Jorgensen returned $500 worth of merchandise, reducing the amount owed to $500. She paid after the discount period, so no discount applies. Macy Company debits Cash and credits Accounts Receivable for $500.

Question 11

A company has gross revenue of $500,000; sales discounts of $2,500; and sales returns and allowances of $3,000.Net revenue is:

Accepted Answer

Net revenue is calculated by subtracting sales discounts and sales returns and allowances from gross revenue: $500,000 - $2,500 - $3,000 = $494,500.

Question 12

Leno Company sells goods to the Fallon Company for $10,000.It offers credit terms of 5/10,n/30.If Fallon Company pays the invoice within the discount period,Leno Company will record a debit to Cash in the amount of:

Accepted Answer

The credit terms of 5/10, n/30 mean that the Fallon Company can deduct a 5% discount if they pay within 10 days. 
Therefore, the amount that Fallon Company needs to pay if they take the discount is: 
$10,000 x (1-0.05) = $9,500. 
Leno Company will record a debit to Cash in the amount of $9,500 if Fallon Company pays within the discount period.

Question 13

Notes receivable from customers and vendors have a maturity date.

Accepted Answer

Notes receivable are a type of written promise to pay a specific sum of money on a specific date or on demand. This means that notes receivable from customers and vendors have a maturity date, which is the date on which the payment is due.

Question 14

On December 1,Macy Company sold merchandise with a selling price of $1,000 on account to Mrs.Jorgensen,with terms 2/10,n/30.Ignoring Cost of Goods Sold,what journal entry did Macy Company prepare on December 1?

Accepted Answer

The correct journal entry records the sale on account by debiting Accounts Receivable and crediting Sales Revenue for the amount of the sale.

Question 15

Accounts (trade)receivables are amounts to be collected from customers from the sale of goods or services.

Accepted Answer

Accounts (trade) receivables are amounts owed by customers to a business for goods or services sold on credit. These amounts are expected to be collected in the near future and are considered assets on the balance sheet.

Question 16

A business offers credit terms of 2/15,n/30.These terms indicate that:

Accepted Answer

The credit terms indicate that a discount of 2% can be taken if the invoice is paid within 15 days of the invoice date.

Question 17

With regard to Accounts Receivable,a separate account for each customer is kept in a(n):

Accepted Answer

A separate account for each customer is kept in a subsidiary ledger, which is a supplementary ledger that provides more detailed information on a specific group of accounts, such as accounts receivable. The control account in the general ledger summarizes the information from the subsidiary ledger.

Question 18

The general ledger has a separate account receivable for each customer.

Accepted Answer

The general ledger has a single account for accounts receivable, which represents the total amount owed by all customers. Each individual customer's balance is recorded in a subsidiary ledger or accounts receivable subledger.

Question 19

On December 1,Macy Company sold merchandise with a selling price of $1,000 on account to Mrs.Jorgensen,with terms 2/10,n/30.Mrs.Jorgensen paid the amount due on December 9.What journal entry did Macy Company prepare on December 9?

Accepted Answer

Mrs. Jorgensen paid within the discount period, so Macy Company would record the cash received minus the discount. The entry would debit Cash for $980, debit Sales Discounts for $20, and credit Accounts Receivable for $1,000.

Question 20

When goods are shipped FOB destination:

Accepted Answer

When goods are shipped FOB destination, the seller retains ownership and responsibility for the goods until they are delivered to the customer's specified location. Therefore, revenue is recognized when the goods are received by the customer.

Quiz 5: Short-Term Investments Receivables