chap 8

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $3,300 as of November 1. During November, Tune Tones purchased merchandise from Mandy Lynn totaling $5,400 and made payments on account to Mandy Lynn in the amount of $2,600. The amount Tune Tones owes Mandy Lynn on November 30 is:

6100

An inventory system which is updated based on a physical inventory count is called a _______ inventory system.

periodic

A system which updates the inventory records when a physical inventory is taken is called a_____________inventory system.

periodic inventory system

The purchaser refers to the return of unsatisfactory goods as a _______ ________

purchase return

A _____ is a form received from the seller for items ordered and shipped.

purchased invoice

A _____ account is used to record the cost of goods bought for resale during a period.

purchases

A temporary account used to record the cost of goods bought for resale during a period is called the

purchases account

A bill that is received by a merchandiser for items ordered and shipped is called a

purchases invoice

A _____ is sent to the customer for items ordered.

sale invoice

true

The credit terms, 2/10, n/30, allow the customer to take a 2 percent discount if payment is made within 10 days of the invoice, otherwise payment is due in full in 30 days.

True or false: A company's internal control process should ensure that the person buying and receiving goods is different from the person making payment.

True

An accounts payable subsidiary ledger is a subsidiary ledger that contains:

a separate account for each creditor

A list of all the balances owed to creditors, prepared to prove that the control account and the subsidiary ledger are equal, is called a schedule of

accounts payable

A price reduction from the amount originally billed is called a purchase ________.

allowance

Assuming a periodic inventory system, the journal entry to record the purchase on account of $1,060 of merchandise with freight of $145 prepaid and added to the invoice is:

debit Purchases $1,060, debit Freight In $145; credit Accounts Payable $1,205.

A company purchases merchandise for $500 plus a freight charge of $50 from a supplier, payment is due in 30 days. This transaction will be recorded with which of the following entries:

debit to purchases for $500 credit to accounts payable for $550 debit to freight in for $50

An allowance received from a creditor will __________ column of the creditor's account

decrease the creditor's account balance and be posted to the debit

If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a:

decrease to accounts payable.

The objectives of an internal control system include the following:

ensure that different people are involved in the process of buying, receiving goods, and making payments for same. create written proof that purchases and payments are authorized.

Under a perpetual inventory method, the cost of merchandise sold to customers is called:

expenses

A company received a credit memorandum for $100 from a supplier for defective product returned. Using a periodic inventory system, this transaction would be recorded with a credit to the _______ account.

purchases returns & allowances

The report prepared to show the quantity and condition of the goods received is called a _______ report.

receiving

A form used to notify the purchasing department that items need to be ordered, is called a purchase _________.

requisition

When the sales department needs goods, it sends a document listing the items to be ordered to the purchasing department. This document is called a purchase

requisition

When goods purchased arrive at the business, they are inspected. The report prepared to show the quantity and condition of the goods received is called a

requisition report

The purchaser refers to unsatisfactory goods, which are returned, as purchases ________.

returns

When a perpetual inventory method is used, the account used to record revenue is called:_____________

sales

After damaged goods are returned, the supplier issues a(n) __________ memorandum.

credit

On October 1, Jerry's Lighting purchased merchandise with a list price of $8,700 with credit terms of 2/15, n/45. On October 3, Jerry's returns $1,700 of the merchandise. Assuming a periodic inventory system is used and Jerry's pays the remaining amount owed on the purchase within the discount period, Jerry's journal entry to record the payment, would include

a debit to Accounts Payable for $7,000.

On October 1, Jerry's Lighting purchased merchandise with a list price of $8,800 with credit terms of 1/15, n/45. On October 3, Jerry's returns $1,700 of the merchandise. Assuming a periodic inventory system is used and Jerry's pays the remaining amount owed on the purchase within the discount period, Jerry's journal entry to record the payment, would include

a debit to Accounts Payable for $7,100.

A subsidiary ledger that contains a separate account for each creditor is called a(n):

accounts payable ledger

A list of all the balances owed to creditors, prepared to prove that the control account and the subsidiary ledger are equal, is called a ________.

schedule of accounts payable

The source document for recording a purchase of merchandise on credit is:

the purchase invoice

True or false: Purchases + Freight In - Purchases Returns and Allowances - Purchases Discounts = Net Delivered Cost of Purchases

true

True or false: The posting of purchase transactions to the general ledger is done in the same manner as sales transactions.

true

On September 1, Jerry's Lighting purchased merchandise with a list price of $12,500 with credit terms of 3/5, n/60. On September 3, Jerry's returns $1,300 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

$10,864 $12,500 list price − $1,300 purchases returns = $11,200 accounts payable $11,200 accounts payable × 0.03 purchases discounts rate = $336 purchases discount $11,200 accounts payable − $336 purchases discounts = $10,864 cash payment

Nadal, Incorporated owes Wozniaki Company $14,560 as of April 1. During April, Nadal, Incorporated purchased $14,450 of merchandise from Wozniaki Company and made payments on account to Wozniaki Company totaling $10,860. The amount Nadal, Incorporated owes Wozniaki Company on April 30 is:

$18,150

On September 1, Jerry's Lighting purchased merchandise with a list price of $13,400 with credit terms of 1/10, n/30. On September 3, Jerry's returns $2,000 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

11286

Purchases were $2,000, purchases returns and allowances were $600, purchases discounts were $28, and freight in was $125. The net delivered cost of purchases equals $

1497

The cash discount in the credit terms 2/10, n/30 is________%

2%

A firm had purchases of $23,800, freight charges of $1,100, and purchases returns and allowances of $1,450 during one month. Its net delivered cost of purchases was

23450

On February 16, Gourmet Cakes purchased $7,400 of merchandise on account from JB Baking. Credit terms of the purchase were 3/10, n/60. On February 24, Gourmet Cakes pays the amount owed. Assuming Gourmet Cakes uses a perpetual inventory system, the journal entry on February 24, to record the payment, would be:

A)Accounts Payable/JB Baking7,400 Merchandise Inventory 222 Cash 7,178

On April 5, Fair Coffee, Incorporated purchased merchandise with a list price of $1,000 and credit terms 2/10, n/30. On April 6, Fair Coffee returns $200 of the merchandise. Assuming Fair Coffee uses a perpetual inventory system, the journal entry on April 6, to record the return, would be

Accounts Payable 200 Merchandise Inventory 200

The Purchases Returns and Allowances account is a________expense of goods sold account, and the normal balance of this account is a (debit/credit)_________

Contra credit

On January 3, Gourmet Cakes sold $15,000 of merchandise, on account with terms 2/10, n/30, to Jerry Hines. Assuming that the original cost of the merchandise to Gourmet Cakes was $4,000 and the perpetual inventory system is used, the journal entry on January 3, to record the sale, would be:

Accounts Receivable/J.Hines 15,000 Sales 15,000 Cost of Goods Sold 4,000 Merchandise Inventory 4,000

An account that records transportation charges for items purchased is called the

Freight In

Transportation charges for items purchased are recorded in the _________ account.

Freight in

A supplier's billing document that is sent to the customer is referred to as a(n)

Sale invoice

A list of all the balances owed to creditors, prepared to prove that the control account and the subsidiary ledger are equal, is called a ________.

Schedule of accounts payable

A list of all the balances owed to creditors, prepared to prove that the control account and the subsidiary ledger are equal, is called a ________.

TRUE

When an accounts payable subsidiary ledger is used, the Accounts Payable account in the general ledger becomes a(n) __________ account.

control

When a perpetual inventory method is used, the account used to record revenue is called:

cost of goods sold

The Purchases Returns and Allowances account is a contra cost of goods sold account, and the normal balance of this account is a (debit/credit) ________.

credit

A company received a credit memorandum for $100 from a supplier for defective product returned. Using a periodic inventory system, this transaction would be recorded with a which of the following entries:

credit to purchases returns & allowances debit to accounts payable

A company purchases merchandise for $600 plus a freight charge of $60 from a supplier, payment is due in 30 days. The $60 freight charge will be recorded as a (debit/credit)________to the__________ account in the amount of $60.

debit freight in

a separate account for each creditor

sales invoice

On September 1, Jerry's Lighting purchased merchandise with a list price of $4,100 with credit terms of 3/10, n/60; freight of $200 prepaid and added to the invoice. On September 3, Jerry's returns $500 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

$3,692. $4,100 list price − $500 purchases returns = $3,600 accounts payable $3,600 accounts payable × 0.03 purchases discounts rate = $108 purchases discounts $3,600 accounts payable − $108 purchases discounts + $200 prepaid freight = $3,692 cash payment

During the year, a firm purchased $57,330 of merchandise and paid freight charges of $12,590. If the total purchases returns and allowances were $6,585 and purchases discounts were $2,130 for the year, what is the net delivered cost of purchases?

$61,205 $57,330 purchases + $12,590 freight in − $6,585 purchases returns and allowances − $2,130 purchases discounts = $61,205 net delivered cost of purchases

On September 1, Jerry's Lighting purchased merchandise with a list price of $7,600 with credit terms of 1/10, n/30. On September 3, Jerry's returns $900 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

$6633 $7,600 list price − $900 purchases return = $6,700 accounts payable $6,700 accounts payable × 0.01 purchases discounts rate = $67 purchases discount $6,700 accounts payable − $67 purchases discounts = $6,633 cash payment