Question Details

Business A 654 CHAPTER 5 PART 5

CHAPTER 5

ACCOUNTING FOR MERCHANDISING OPERATIONS


61.	A buyer would record a payment within the discount period under a perpetual inventory system by crediting
a.	Accounts Payable.
b.	Inventory.
c.	Purchase Discounts.
d.	Sales Discounts.


	62.	If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the
a.	Inventory account will be increased.
b.	Inventory account will not be affected.
c.	seller will bear the freight cost.
d.	carrier will bear the freight cost.


	63.	Freight costs paid by a seller on merchandise sold to customers will cause an increase
a.	in the selling expense of the buyer.
b.	in operating expenses for the seller.
c.	to the cost of goods sold of the seller.
d.	to a contra-revenue account of the seller.


	64.	Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the
a.	seller.
b.	buyer.
c.	transportation company.
d.	buyer and the seller.


	65.	Glenn Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period?
a.	$8,100
b.	$8,280
c.	$8,820
d.	$9,000


	66.	Scott Company purchased merchandise with an invoice price of $3,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms?
a.	20%
b.	24%
c.	18%
d.	36%


	67.	If a company is given credit terms of 2/10, n/30, it should
a.	hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.
b.	pay within the discount period and recognize a savings.
c.	pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.
d.	recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.


	68.	In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to
a.	Inventory.
b.	Purchase Discounts.
c.	Purchase Allowance.
d.	Sales Discounts.


	69.	Jake- Market recorded the following events involving a recent purchase of merchandise:
Received goods for $60,000, terms 2/10, n/30.
Returned $1,200 of the shipment for credit.
Paid $300 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company- inventory increased by
a.	$57,624.
b.	$57,918.
c.	$57,924.
d.	$59,100.



70.	Costner- 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- inventory
a.	increased by $38,416.
b.	increased by $38,612.
c.	increased by $38,616.
d.	increased by $39,400.


	71.	Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in 
a.	Freight Expense.
b.	Freight - In.
c.	Inventory.
d	Freight - Out.


	72.	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:
a.	Accounts Payable		5,000
		Inventory			5,000
b.	Accounts Payable		5,000
	Inventory		150
		Cash			5,150
c.	Accounts Payable		5,000
		Purchase Discounts			120
		Inventory			4,850
d.	Accounts Payable		5,000
		Inventory			120
		Cash			4,850


	73.	McIntyre Company made a purchase of merchandise on credit from Marvin Company on August 8, for $9,000, terms 3/10, n/30. On August 17, McIntyre makes the appropriate payment to Marvin. The entry on August 17 for McIntyre Company is:
a.	Accounts Payable		9,000
		Cash			9,000
b.	Accounts Payable		8,730
		Cash			8,730
c.	Accounts Payable		9,000
		Purchase Returns and Allowances			270
MC. 73	(Cont.)
		Cash			8,730
d.	Accounts Payable		9,000
		Inventory			270
		Cash			8,730


	74.	On July 9, Sheb Company sells goods on credit to Wooley Company for $5,000, terms 1/10, n/60. Sheb receives payment on July 18. The entry by Sheb on July 18 is:
a.	Cash		5,000
		Accounts Receivable			5,000
b.	Cash		5,000
		Sales Discounts			50
		Accounts Receivable			4,950
c.	Cash		4,950
	Sales Discounts		50
		Accounts Receivable			5,000
d.	Cash		5,050
		Sales Discounts			50
		Accounts Receivable			5,000


	75.	On November 2, 2014, Kasdan Company has cash sales of $6,000 from merchandise having a cost of $3,600. The entries to record the day's cash sales will include:
a.	a $3,600 credit to Cost of Goods Sold.
b.	a $6,000 credit to Cash.
c.	a $3,600 credit to Inventory.
d	a $6,000 debit to Accounts Receivable.


	76.	A credit sale of $4,000 is made on April 25, terms 2/10, n/30, on which a return of $250 is granted on April 28.  What amount is received as payment in full on May 4?
a.	$3,675
b.	$3,750
c.	$3,920
d	$4,000


77.	The entry to record the receipt of payment within the discount period on a sale of $2,000 with terms of 2/10, n/30 will include a credit to
a.	Sales Discounts for $40.
b.	Cash for $1,960.
c.	Accounts Receivable for $2,000.
d.	Sales Revenue for $2,000.


	78.	The collection of a $6,000 account within the 2 percent discount period will result in a 
a.	debit to Sales Discounts for $120.
b.	debit to Accounts Receivable for $5,880.
c.	credit to Cash for $5,880.
d.	credit to Accounts Receivable for $5,880.


	79.	Company X sells $900 of merchandise on account to Company Y with credit terms of 2/10, n/30. If Company Y remits a check taking advantage of the discount offered, what is the amount of Company Y's check?
a.	$630
b.	$720
c.	$810
d.	$882


	80.	Cleese Company sells merchandise on account for $5,000 to Langston Company with credit terms of 2/10, n/30. Langston Company returns $1,000 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?
a.	$3,920
b.	$4,000
c.	$4,900
d.	$4,920