Question 1

Molly's Craft Shop sold goods for $450 plus PST at 5% to a charge customer. The customer returned $100 worth of goods for credit. Terms of the sale were 2/10, n/30. If the customer pays the amount within the discount period, what amount should the customer pay?

Accepted Answer

First, calculate the total cost including PST: $450 + ($450 * 5%) = $472.50. After returning $100 worth of goods, the new total is $372.50. With a 2% discount for early payment, the amount to pay is $372.50 - ($372.50 * 2%) = $360.50.

Question 2

A credit memorandum decreases which account on the seller's books?

Accepted Answer

A credit memorandum issued by a seller will decrease the Accounts Receivable account, as it represents a reduction in the amount that a customer owes to the seller.

Question 3

Singh Company received payment in full within the credit period for goods sold for $400 plus 13% HST. Terms of the sale were n/30. Which entry records this transaction?

Accepted Answer

The correct entry is D) Debit Cash, $452, credit Accounts Receivable, $452. This is because the payment includes the 13% HST on the $400 sale, making the total payment $452 ($400 + $52 HST). The cash account is debited to reflect the increase in cash, and the accounts receivable is credited to reflect the settlement of the owed amount.

Question 4

The collection of an invoice for $5,000 plus HST of 13% within the 2/10 n/30 discount period was recorded using a 3% discount rather than a 2% discount in both the controlling and subsidiary accounts. This error will cause

Accepted Answer

The error results in recognizing a larger discount than appropriate, reducing revenue and thus understating net income.

Question 5

Customers can take cash discounts on GST and PST when terms are 2/10, n/30.

Accepted Answer

Cash discounts typically apply to the invoice amount before taxes like GST and PST, not on the taxes themselves.

Question 6

Use the following information to answer the questions below:
Sales $73,400
HST Collected 9,542
Sales Discount 1,500
Sales Returns and Allowances 900
Delivery Expense 700
The Net Sales are ________.

Accepted Answer

The answer of Use the following information to answer the...

Question 7

Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 13% HST. The invoice included HST at 13% and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the return would include

Accepted Answer

The return of 5 necklaces would result in a reduction in both sales revenue and accounts receivable. The cost of the necklaces returned would also be reduced, resulting in a decrease in the cost of goods sold. The amount of the return would be calculated as 5 necklaces x $25 = $125. This amount would be recorded as a debit to Sales Returns and Allowances to reduce sales revenue and a credit to Accounts Receivable to reduce the amount owed by the credit customer. There would be no impact on Sales Tax Payable as the HST charged would also be reduced by the return.

Question 8

The contra-revenue accounts include

Accepted Answer

Contra-revenue accounts are the accounts that offset the revenue accounts. The two most common contra-revenue accounts are Sales Returns and Allowances and Sales Discounts. HST Payable is a liability account used to record the tax collected on behalf of the government. It is not a contra-revenue account. Therefore, both B (Sales Returns and Allowances) and C (Sales Discounts) are correct as they are both examples of contra-revenue accounts.

Question 9

Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 5% GST. The invoice included a 6% provincial sales tax, 5% GST, and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the original sale would include

Accepted Answer

The original sale would be recorded by debiting Accounts Receivable for the total amount including taxes: 25 necklaces x $25 = $625, plus 6% PST and 5% GST, which totals $693.75.

Question 10

Singh Company received payment in full within the discount period for goods sold for $400 plus 13% HST. Terms of the sale were 2/10, n/30. Which entry records this transaction?

Accepted Answer

The correct entry to record the transaction is to debit Cash for the amount received after taking the discount into account, debit Sales Discounts for the discount amount, and credit Accounts Receivable for the full invoice amount including HST. The sale amount including HST is $400 + ($400 * 13%) = $452. The discount is 2% of $400 = $8. Therefore, the cash received is $452 - $8 = $444. This makes option B correct.

Question 11

Sales discounts are always given on taxes such as PST and HST.

Accepted Answer

Sales discounts are given on the price of goods or services before taxes are applied. Therefore, they are not given on taxes such as PST and HST.

Question 12

Cynthia's Crystals sold $1,000 worth of crystal plus 5% GST and 8% PST to a charge customer with terms 2/10, n/30. The invoice was paid within terms. The entry to record receipt of payment is

Accepted Answer

The total amount due on the invoice including taxes is:
$1,000 + 5% GST ($50) + 8% PST ($80) = $1,130

Since the invoice was paid within terms (2/10, n/30), the customer is entitled to a cash discount of 2% on the amount due ($1,130 x 2% = $22.60). Therefore, the amount actually received by the company is:
$1,130 - $22.60 = $1,107.40

The entry to record receipt of payment would then be:
Debit Cash $1,107.40
Debit Cash Discounts $20.60
Credit Accounts Receivable $1,130

Option C is the closest to this answer as it is the only option showing both cash and cash discount debited, and accounts receivable credited.

Question 13

Net Sales equals Gross Sales plus HST, less Sales Returns & Allowances, less Sales Discounts.

Accepted Answer

Net Sales equals Gross Sales minus Sales Returns & Allowances, minus Sales Discounts. HST is not included in Net Sales as it is a separate tax collected by the business on behalf of the government.

Question 14

Calculate gross sales:
Net sales = $75,000
HST charged = $14,300
Sales returns and allowances - $15,000
Sales discounts - $20,000
Accounts receivable - $12,000

Accepted Answer

The answer of Calculate gross sales:
Net sales = $75,000
HST charged...

Question 15

Sales discounts are NOT taken on which of the following?

Accepted Answer

Sales discounts are not taken on freight or merchandise returned.

Question 16

Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15. The invoice included a 5% provincial sales tax and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the payment if it was received during the discount period would include

Accepted Answer

The answer of Sue's Jewelry sold 25 necklaces for $25...

Question 17

Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 5% GST. The invoice included a 6% provincial sales tax, 5% GST, and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the original sale would include

Accepted Answer

The answer of Sue's Jewelry sold 25 necklaces for $25...

Question 18

Secret Trails received payment in full within the credit period for boarding for $800 plus 13% HST. Terms of the sale were 2/10, n/30. Which entry is required to record this transaction?

Accepted Answer

The correct entry to record the receipt of payment including the Harmonized Sales Tax (HST) is to debit Cash for the total amount received, which includes the $800 for boarding plus the 13% HST ($800 * 0.13 = $104), totaling $904. However, the correct entry should credit Accounts Receivable for $904, not Sales or Cash, because this transaction is about receiving payment, not making a sale. The correct total received is $904, but the explanation for crediting Accounts Receivable is to reflect the payment of the invoice, not Sales. Therefore, the closest correct option given is B) Debit Cash, $888; credit Accounts Receivable, $888, with the understanding that the actual amount should be $904, indicating a typo in the options.

Question 19

Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15. The invoice included a 5% provincial sales tax and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the payment if it was received after the discount period would include

Accepted Answer

The answer of Sue's Jewelry sold 25 necklaces for $25...

Question 20

Sales discounts are usually allowed only on

Accepted Answer

Sales discounts are usually offered to customers who make credit purchases, as an incentive to pay their bills early.

Quiz 11: Special Journals With Taxes

Molly's Craft Shop sold goods for $450 plus PST at 5% to a charge customer. The customer returned $100 worth of goods for credit. Terms of the sale were 2/10, n/30. If the customer pays the amount within the discount period, what amount should the customer pay?

A credit memorandum decreases which account on the seller's books?

Singh Company received payment in full within the credit period for goods sold for $400 plus 13% HST. Terms of the sale were n/30. Which entry records this transaction?

The collection of an invoice for $5,000 plus HST of 13% within the 2/10 n/30 discount period was recorded using a 3% discount rather than a 2% discount in both the controlling and subsidiary accounts. This error will cause

Customers can take cash discounts on GST and PST when terms are 2/10, n/30.

Use the following information to answer the questions below: Sales $73,400 HST Collected 9,542 Sales Discount 1,500 Sales Returns and Allowances 900 Delivery Expense 700 The Net Sales are ________.

Sue's Jewelry sold 25 necklaces for $25 each to a credit customer. The cost of the necklaces to Sue's Jewelry was $15 plus 13% HST. The invoice included HST at 13% and payment terms of 2/10, n/30. Five necklaces were returned prior to payment. The entry to record the return would include

The contra-revenue accounts include

Singh Company received payment in full within the discount period for goods sold for $400 plus 13% HST. Terms of the sale were 2/10, n/30. Which entry records this transaction?

Sales discounts are always given on taxes such as PST and HST.

Cynthia's Crystals sold $1,000 worth of crystal plus 5% GST and 8% PST to a charge customer with terms 2/10, n/30. The invoice was paid within terms. The entry to record receipt of payment is

Net Sales equals Gross Sales plus HST, less Sales Returns & Allowances, less Sales Discounts.

Calculate gross sales: Net sales = $75,000 HST charged = $14,300 Sales returns and allowances - $15,000 Sales discounts - $20,000 Accounts receivable - $12,000

Sales discounts are NOT taken on which of the following?

Secret Trails received payment in full within the credit period for boarding for $800 plus 13% HST. Terms of the sale were 2/10, n/30. Which entry is required to record this transaction?

Sales discounts are usually allowed only on