Chapter 7 Quiz

Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax. The entry in the general journal will include a credit to Sales for a. $2,250.00. b. $2,092.50. c. $2,452.50. d. $2,362.00.

a. $2,250.00. Sales total $2,250

___________ are required to collect sales tax from customers, make periodic payments to the taxing authority, and pay the taxes due when reports are filed. a. Retailers b. Wholesalers c. Manufacturers d. Distributors

a. Retailers

Sales Returns and Allowances have the effect of a. decreasing total revenue. b. increasing total revenue. c. increasing expenses. d. increasing assets.

a. decreasing total revenue.

A firm that sells goods that it purchases for re-sale is a a. service business. b. merchandising business. c. manufacturing business. d. non-profit business.

b. merchandising business

The Sales Returns and Allowances account is presented a. on the balance sheet as a deduction from Accounts Receivable. b. on the income statement as a deduction from Sales. c. on the income statement as an addition to Sales. d. on the balance sheet as a deduction from Capital.

b. on the income statement as a deduction from Sales.

Hugh Snow, the buyer, returned merchandise to Farley Co., the seller. The entry on the books of Farley company to record the return of merchandise from Hugh Snow would include a: a. Debit to Accounts Payable b. Credit to Sales Returns and Allowances c. Debit to Account Receivable d. Debit to Sales Returns and Allowances

d. Debit to Sales Returns and Allowances

On October 12, Equipment Inc. sells $35,000 worth of equipment on account, to a credit customer with credit terms of 1/10, n/30. Select the correct entry to record the sale on Oct. 12.

c.

If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were a. $54,000. b. $50,000. c. $46,000. d. $4,000.

c. $46,000. $50,000 - $4,000 = $46,000

Which of the following describes the Sales Tax Payable account? a. A revenue account with a normal credit balance. b. A liability account with a normal debit balance. c. A liability account with a normal credit balance. d. An asset account with a normal debit balance.

c. A liability account with a normal credit balance.

Which of the following is not one of the three basic types of businesses? a. Service b. Merchandising c. International d. Manufacturing

c. International

The Sales account is classified as a. a liability account. b. an asset account. c. a contra account. d. a revenue account.

d. a revenue account.

A wholesale business sells goods with a list price of $900 and a trade discount of 40 percent. The net price is a. $360.00. b. $540.00. c. $900.00. d. $940.00.

b. $540.00. $900 - ($900 .4) = $540

Lamps Unlimited, a wholesaler, sold several crates of lighting for $1,000 on account, to a customer with credit terms of 1/10, n/30. If the customer pays within the discount period, the journal entry to record the receipt of payment would include: a. a debit to Accounts Receivable for $1,000. b. a credit to Accounts Receivable for $1,000. c. a debit to Sales Discounts for $100. d. a credit to Sales Discounts for $10.

c. a debit to Sales Discounts for $100. $1,000 .01 = $10 discount. Debit Cash $990; Debit Sales Discounts $10; Credit Accounts Receivable $1,000

A credit policy that is too lenient results in a. increased sales volume accompanied by a low level of losses. b. decreased sales volume accompanied by a low level of losses. c. increased sales volume accompanied by a high level of losses. d. decreased sales volume accompanied by a high level of losses.

c. increased sales volume accompanied by a high level of losses.

The amount used by wholesalers to record sales in the general journal is a. the retail price. b. the list price. c. the net price. d. the original price.

c. the net price.

A credit policy that is too tight results in a. high level of losses at the expense of decreases in sales volume. b. high level of losses at the expense of increases in sales volume. c. low level of losses at the expense of decreases in sales volume. d. low level of losses at the expense of increases in sales volume.

d. low level of losses at the expense of increases in sales volume.

A company that earns income by buying merchandise then reselling it to its customers in the same condition in which it was purchased is a(n) a. manufacturing business. b. service business. c. non-for profit business. d. merchandising business.

d. merchandising business.

The amount of the trade discount taken by the customer is: a. recorded as an expense. b. recorded as a revenue. c. recorded as a liability. d. not recorded as sales are recorded net of trade discounts.

d. not recorded as sales are recorded net of trade discounts.