Question 1

The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

Accepted Answer

The amount of total cash paid to the seller would include both the list price and the sales tax. Sales tax is added as an additional charge on top of the list price for most merchandise purchased for consumption.

Question 2

In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is

Accepted Answer

When recording the cost of merchandise sold for cash, the merchandise inventory account is credited and the cost of merchandise sold account is debited. This is because the inventory has been sold and it is no longer an asset for the business. Instead, the cost of merchandise sold is an expense that must be recorded in order to accurately reflect the financial performance and position of the business. Option A is incorrect because sales should not be credited when recording the cost of merchandise sold, as sales represent revenue earned from the sale of goods or services. Option C is incorrect because the debit and credit have been reversed. Option D is incorrect because accounts receivable should not be debited when recording the cost of merchandise sold for cash.

Question 3

Merchandise is sold for cash. The selling price of the merchandise is $5,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include

Accepted Answer

The answer of Merchandise is sold for cash. The selling...

Question 4

If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

Accepted Answer

FOB destination means that the seller is responsible for the freight costs of delivering the merchandise to the buyer's specified destination.

Question 5

A retailer purchases merchandise with a catalog list price of $25,000. The retailer receives a 30% trade discount and credit terms of 2/10, n/30. What amount should the retailer debit to the Merchandise Inventory account?

Accepted Answer

The answer of A retailer purchases merchandise with a catalog...

Question 6

Emma Co. sold Isabella Co. merchandise on account FOB shipping point,, 2/10, net 30, for $15,000. Emma Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will Isabella Co. make to record payment of the merchandise if Isabella Co. pays within the discount period?

Accepted Answer

The answer of Emma Co. sold Isabella Co. merchandise on...

Question 7

Isaac Co. sells merchandise on credit to Sonar Co in the amount of $9,600. The invoice is dated on April 15 with terms of 1/15, net 45. If Sonar Co. chooses not to take the discount, by when should the payment be made?

Accepted Answer

If Sonar Co. chooses not to take the discount, the payment should be made by the end of the credit period, which is 45 days after the invoice date. Therefore, the payment should be made by May 30.

Question 8

A sales invoice included the following information: merchandise price, $10,000; freight, $900; terms 1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $500 is granted prior to payment and that the invoice is paid within the discount period, what is the amount of cash that should be received by the seller?

Accepted Answer

The answer of A sales invoice included the following information:...

Question 9

Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?

Accepted Answer

Under a perpetual inventory system, both the sale and the cost of merchandise sold need to be recorded at the time of the sale. Choice B correctly records the cash receipt, sales revenue, and cost of merchandise sold. The entry debits cash for $2,000 and cost of merchandise sold for $1,250, and credits sales for $2,000 and merchandise inventory for $1,250. This reflects the increase in cash and the decrease in inventory due to the sale. The other choices incorrectly omit one or more necessary journal entries.

Question 10

Anthony Company sold Madison Company merchandise on account FOB shipping point, 2/10, net 30, for $10,000. Anthony prepaid the $300 shipping charge. Which of the following entries does Anthony make to record this sale?

Accepted Answer

The answer of Anthony Company sold Madison Company merchandise on...

Question 11

Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as

Accepted Answer

Sales discount refers to the discount given by the seller to the buyer for early payment. Therefore, it is recorded in the seller's accounting records as a sales discount.

Question 12

Taking advantage of a 2/10, n/30 purchases discount is equal to a savings yearly rate of approximately

Accepted Answer

The answer of Taking advantage of a 2/10, n/30 purchases...

Question 13

Merchandise with an invoice price of $3,000 is purchased on September 2 subject to terms of 2/10, n/30, FOB destination. Freight costs paid by the seller totaled $200. What is the cost of the merchandise if paid on September 12, assuming the discount is taken?

Accepted Answer

The answer of Merchandise with an invoice price of $3,000...

Question 14

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

Accepted Answer

FOB shipping point means that the buyer assumes ownership and responsibility for the goods as soon as they are shipped from the seller's location. Therefore, title to the merchandise passes to the buyer at this point.

Question 15

Which of the following accounts usually has a debit balance?

Accepted Answer

Freight-In is an expense account and expenses have a debit balance.

Question 16

If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

Accepted Answer

FOB shipping point means that the buyer is responsible for the freight costs and assumes the risk of loss once the goods leave the seller's premises.

Question 17

Who pays the freight costs when the terms are FOB shipping point?

Accepted Answer

FOB shipping point means that the buyer is responsible for paying the freight costs once the goods leave the seller's shipping dock. Therefore, the buyer pays the freight costs in this scenario.

Question 18

A chart of accounts for a merchandising business

Accepted Answer

A merchandising business requires accounts specific to inventory and cost of goods sold, which a service business does not need. Therefore, a chart of accounts for a merchandising business usually requires more accounts than a chart of accounts for a service business.

Question 19

When goods are shipped FOB destination and the seller pays the freight charges, the buyer

Accepted Answer

When goods are shipped FOB (Free On Board) destination, the seller owns the goods during transit and is responsible for the freight charges. The buyer does not make any journal entry for the freight because the seller bears the shipping costs.

Question 20

Isaac Co. sells merchandise on credit to Sonar Co in the amount of $5,700. The invoice is dated on April 1 with terms of 1/15, net 45. What is the amount of the discount and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?

Accepted Answer

The answer of Isaac Co. sells merchandise on credit to...

Quiz 5: Accounting for Merchandising Businesses