Question 1

Fashion Jewelers uses the perpetual inventory system.On April 2,Fashion sold goods with a cost of $5,500 for $14,000 with terms of 4/15,n/30.On April 4,the customer reported damaged goods and Fashion granted a $2,000 sales allowance.On April 10,Fashion received the payment for the sale.Give the journal entry that will be recorded on April 10 by Fashion.

Accepted Answer

The answer of Fashion Jewelers uses the perpetual inventory system.On...

Question 2

The Sales Discounts account is a contra account to the ________ account.

Accepted Answer

The Sales Discounts account is a contra account that reduces the Sales Revenue account. Therefore, the correct answer is B, Sales Revenue. The Purchases account is used to record the cost of inventory purchased. The Merchandise Inventory account is used to track the cost of inventory on hand. The Sales Returns and Allowances account is used to record the reduction in sales revenue due to returns or allowances granted to customers.

Question 3

When a merchandiser records sales returns,Accounts Receivable is credited.(Assume the seller uses the perpetual inventory system. )

Accepted Answer

When a merchandiser records sales returns, a credit is made to Accounts Receivable because the customer no longer owes the full amount. This is assuming that the seller uses the perpetual inventory system, which updates inventory in real-time.

Question 4

Under the perpetual inventory system,the journal entries to record sales returns (the original sale was on account)would be:

Accepted Answer

The answer of Under the perpetual inventory system,the journal entries...

Question 5

When a customer returns goods to the seller,the seller debits the Purchase Returns account.

Accepted Answer

When a customer returns goods, the seller debits the Sales Returns account, not the Purchase Returns account.

Question 6

A merchandiser sold merchandise inventory on account.The journal entry to record sales allowances in the books of the merchandiser,using the perpetual inventory system would be:

Accepted Answer

The answer of A merchandiser sold merchandise inventory on account.The...

Question 7

On November 1,2016,Everett Janitorial Supply sold merchandise with a cost of $3,200 for $5,000,FOB destination,and payment terms of 2/10,n/30.The company uses a perpetual inventory system.Give journal entries to record the sales revenue.

Accepted Answer

The answer of On November 1,2016,Everett Janitorial Supply sold merchandise...

Question 8

Journalize the following transaction for a merchandiser that uses the perpetual inventory system.
Received returned goods from a customer,$1,000 (cost,$740).

Accepted Answer

The answer of Journalize the following transaction for a merchandiser...

Question 9

Journalize the following transaction for a merchandiser that uses the perpetual inventory system.
Sold goods for cash,$1,200 (cost $750).

Accepted Answer

The answer of Journalize the following transaction for a merchandiser...

Question 10

A company sold merchandise for $4,000 on account with terms of 4/15,n/30.The company uses a perpetual inventory system.Defective merchandise of $200 was returned two days later.If the payment was received after 30 days,the journal entry to record the cash receipt will include ________.

Accepted Answer

The customer is eligible for a 4% discount if they pay within 15 days of the purchase. Therefore, the net amount due will be $4,000 - 4% of $4,000 = $3,840.

When the defective merchandise is returned, the journal entry will be:

Debit: Accounts Receivable $200
Credit: Sales Revenue $200

After the payment is received, the journal entry will be:

Debit: Cash $3,800
Credit: Accounts Receivable $3,800

This reflects the amount the customer owed after deducting the discount, and accounts for the return of defective merchandise.

Question 11

Journalize the following transactions for a merchandiser that uses the perpetual inventory system.
On January 8,inventory was sold for $6,000 on account.Credit terms were 3/15,n/30 (cost $4,500).On January 17,cash was received in full settlement of the January 8 sale.

Accepted Answer

The answer of Journalize the following transactions for a merchandiser...

Question 12

Rally Auto Supplies uses a perpetual inventory system.Journalize the following sales transactions for this company.Explanations are not required.

Accepted Answer

The answer of Rally Auto Supplies uses a perpetual inventory...

Question 13

Under a perpetual inventory system,merchandise returned by a customer to the seller is recorded as a ________ in the books of seller.

Accepted Answer

Merchandise returned by a customer to the seller is recorded as a sales return in the books of the seller in a perpetual inventory system. This is because the perpetual inventory system keeps track of inventory in real-time, and recording the return as a sales return allows the system to adjust the inventory levels accordingly. Sales allowance and sales discount are also adjustments made to the sales revenue account, but they do not affect inventory levels. Purchase return, on the other hand, is recorded by the buyer when they return merchandise to the seller.

Question 14

When a seller grants a sales allowance,the customer does not return any goods to the seller.

Accepted Answer

A sales allowance is a discount given to the customer without the need for the customer to return any goods to the seller. Therefore, the statement is true.

Question 15

The normal balances of Sales,Sales Discounts,and Sales Returns and Allowances are ________.

Accepted Answer

The normal balance of Sales is credit because it represents the revenue earned by the business. 
The normal balance of Sales Discounts is a contra-revenue account, which means it has the opposite balance of Sales. Since Sales has a credit balance, Sales Discounts has a debit balance. 
The normal balance of Sales Returns and Allowances is also a contra-revenue account and has a debit balance because it represents the reductions in revenue due to returns and allowances. Therefore, the correct option is C - credit, debit, and debit respectively.

Question 16

A sales allowance is recorded with a credit to Accounts Payable.

Accepted Answer

A sales allowance is recorded with a debit to Sales Allowances and a credit to Accounts Receivable, not Accounts Payable.

Question 17

A reduction in the amount of cash received from a customer for early payment is known as a sales discount.

Accepted Answer

A sales discount is a reduction in the amount of cash a customer has to pay if they pay their invoice early. This discount is typically expressed as a percentage of the total invoice amount. For example, a 2% sales discount may be offered if the invoice is paid within 10 days of the date of the invoice. The purpose of offering a sales discount is to encourage customers to pay their invoices early, which can help improve a company's cash flow.

Question 18

Under the perpetual inventory system,what is the difference between a sales return and a sales allowance?

Accepted Answer

Under the perpetual inventory system, a sales return involves an adjustment to Merchandise Inventory because the returned goods are added back to inventory, whereas a sales allowance does not involve such an adjustment.

Question 19

A company sold merchandise for $24,000 on account with terms of 5/15,n/30.The company uses a perpetual inventory system.After two days,it received defective merchandise worth $4,000.The journal entry to record the cash receipt for the sale if the payment is received within 10 days of the invoice date would include ________.

Accepted Answer

The terms 5/15,n/30 mean that the buyer can take a 5% discount if the payment is made within 15 days, otherwise, the full amount is due in 30 days. Therefore, if the payment is received within 10 days, the buyer can take the discount, which is 5% of $24,000 or $1,200. Thus, the cash receipt would be $24,000 - $1,200 = $22,800.

The journal entry to record the cash receipt would be:

Debit Cash $22,800 
Debit Sales Discount $1,200 ($24,000 x 5%) 
Credit Accounts Receivable $24,000

There is no mention of the defective merchandise being returned or refunded, so it is not included in the journal entry. The Merchandise Inventory account is also not affected because the transaction is a cash sale, and the perpetual inventory system updates the inventory account only when merchandise is purchased or sold on credit.

Question 20

Office Supplies Express uses a perpetual inventory system.Journalize the following sales transactions for this company.Explanations are not required.

Accepted Answer

The answer of Office Supplies Express uses a perpetual inventory...

Quiz 5: Merchandising Operations