Question 1

If a buyer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a purchase

Accepted Answer

The transaction in which a buyer agrees to keep merchandise that is defective because the seller is willing to reduce the selling price is known as a purchase allowance. The allowance is a reduction in the selling price of the merchandise and is intended to compensate the buyer for the inconvenience and cost of dealing with the defects. A purchase discount is a reduction in the selling price of merchandise offered by the seller to the buyer as an incentive for prompt payment. A return occurs when a buyer sends merchandise back to the seller because it is defective or for some other reason. A contra asset is an asset account with a credit balance that reduces the total value of the asset reported on the balance sheet.

Question 2

On March 7, Solaris Company sells $3,000 of merchandise on account to Bebb Company with credit terms of 2/10, n/30. If Bebb remits a check on March 16, what is the amount of the check?

Accepted Answer

Bebb Company is eligible for a 2% discount because they are paying within 10 days. The discount is 2% of $3,000, which is $60. Therefore, the amount of the check is $3,000 - $60 = $2,940.

Question 3

Prepare the necessary journal entries on the books of Magic Carpet Company to record the following transactions, assuming a perpetual inventory system (you may omit explanations):
(a) Magic purchased $49,000 of merchandise on account, terms 2/10, n/30.
(b) Returned $4,000 of damaged merchandise for credit.
(c) Paid for the merchandise purchased within 10 days.

Accepted Answer

The answer of Prepare the necessary journal entries on the...

Question 4

Python Company sells merchandise on account for $5,000 to Monte Company with credit terms of 2/10, n/30. Monte Company returns $1,500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Accepted Answer

The answer of Python Company sells merchandise on account for...

Question 5

Josie's Cameras paid $500 freight to have a shipment of cameras it purchased delivered to their store. The next day, Josie's paid $30 to ship a camera to a customer. Prepare the two entries.

Accepted Answer

The answer of Josie's Cameras paid $500 freight to have...

Question 6

Company M sells $900 of merchandise on account to Company N with credit terms of 1/15, n/30. If Company N remits a check taking advantage of the discount offered, what is the amount of Company N's check?

Accepted Answer

The answer of Company M sells $900 of merchandise on...

Question 7

Costner's Market recorded the following events involving a recent purchase of merchandise: Received goods for $40,000, terms 2/10, n/30.
Returned $800 of the shipment for credit.
Paid $200 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company's inventory

Accepted Answer

The net amount after the discount can be calculated as: 
$40000 - ($40000 * 2%) = $39200
Then adding the freight of $200, the total cost is $39400
After returning $800 of merchandise, the final cost of the inventory is $38600
Therefore, the inventory increased by $38616 ($38600 + $16 credit for returned merchandise).

Question 8

The credit terms offered to a customer by a business firm are 3/10, n/30, which means that

Accepted Answer

The credit terms offered to a customer by a business firm are 3/10, n/30 means that the customer can deduct a 3% discount if the bill is paid within 10 days of the invoice date.

Question 9

During October 2020, Blondie's Catering Company generated sales revenue of $15,000. Expenses were as follows: Cost of goods sold of $7,900 and operating expenses of $2,600.
Calculate (1) gross profit and (2) net income for the month.

Accepted Answer

The answer of During October 2020, Blondie's Catering Company generated...

Question 10

For each of the following, determine the missing amounts.

Accepted Answer

The answer of For each of the following, determine the...

Question 11

Ayala Company sells merchandise on account for $9,000 to Verde Company with credit terms of 2/10, n/30. Verde Company returns $1,500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

Accepted Answer

Verde Company initially owes $9000. After returning $1500 of damaged merchandise, the amount owed is reduced to $7500. With a 2% discount for early payment, the discount amount is $7500 * 0.02 = $150. Therefore, the amount of the check is $7500 - $150 = $7350.

Question 12

On June 2, Plymouth Company sells merchandise on account for $5,000 to Merriweather Company with credit terms of 2/10, n/30. On June 5, Merriweather Company is granted a $500 allowance for merchandise that was slightly damaged. Merriweather pays the account on June 15. The amount collected by Plymouth is

Accepted Answer

- The original amount of the sale was $5,000.
- Since the credit terms were 2/10, n/30, Merriweather Company is eligible for a 2% discount ($5,000 x 0.02 = $100) if they pay within 10 days.
- However, they were also granted a $500 allowance for damaged merchandise, which reduces their balance to $4,500 ($5,000 - $500 = $4,500).
- Merriweather pays on June 15, which is after the discount period, so they pay the full balance of $4,500.
- Therefore, the amount collected by Plymouth is $4,500.

Question 13

As an incentive for buyers to pay their accounts promptly, a business may offer its customers

Accepted Answer

Offering a purchase discount is a common incentive for buyers to pay their accounts promptly. This discount can be a percentage off the total amount owed or a specific dollar amount. It provides an immediate reward for paying the bill on time and encourages customers to prioritize their payments to this business.

Question 14

McIntyre Company made a purchase of merchandise on credit from Marvin Company on August 8, for $11,000, terms 3/10, n/30. On August 17, McIntyre makes the appropriate payment to Marvin. The entry on August 17 for McIntyre Company is:

Accepted Answer

The answer of McIntyre Company made a purchase of merchandise...

Question 15

Presented here is information about Brady Company's inventory. Determine the missing amounts.

Accepted Answer

The answer of Presented here is information about Brady Company's...

Question 16

Donkey's Discs purchased 5 cases of cash register receipt paper for $50 cash.

Accepted Answer

The answer of Donkey's Discs purchased 5 cases of cash...

Question 17

Glover Co. returned defective goods costing $5,000 to Mal Company on April 19, for credit. The goods were purchased April 10, on credit, terms 3/10, n/30. The entry by Glover Co. on April 19, in receiving full credit is:

Accepted Answer

The answer of Glover Co. returned defective goods costing $5,000...

Question 18

On December 9, Carolina Company sells merchandise on account for $90,000 to Virginia Company with credit terms of 1/10, n/30. On December 15, Virginia Company returns $1,500 of merchandise that was damaged, along with a check to settle the account. What is the amount of the check?

Accepted Answer

The original sale was $90,000. Virginia Company returned $1,500 of damaged merchandise, reducing the amount owed to $88,500. Since the payment is made within the discount period (1/10, n/30), Virginia Company is eligible for a 1% discount on the remaining balance. The discount is 1% of $88,500, which is $885. Therefore, the amount of the check is $88,500 - $885 = $87,615.

Question 19

Company P sells $3,000 of merchandise on account to Company Q with credit terms of 2/10, n/30. If Company Q remits a check taking advantage of the discount offered, what is the amount of Company Q's check?

Accepted Answer

The answer of Company P sells $3,000 of merchandise on...

Question 20

Presented here are the components in Bradley Company's income statement. Determine the missing amounts.

Accepted Answer

The answer of Presented here are the components in Bradley...

Quiz 7: Merchandising Companies: Purchases Perpetual