Chapter 7

Modern Candy, a wholesaler, sold a crate of candy for $600 on account to a customer with credit terms of 3/20, n/60. If the customer pays within the discount period, how much cash will Modern Candy receive when it is paid?

480

Big Door Co. sold a garage door to Roxy's Repairs on credit and issued Sales Slip 212 for $8,000 plus sales tax of $800. The entry to record this transaction will include a credit to sales in the amount of

8000

A bank credit card sale will be recorded with a debit to which account:

cash

An account that serves as a link between the subsidiary ledger and the general ledger, and whose balance summarizes the balances of its related accounts in the subsidiary ledger is called a account.

control

Which of the following is not recorded in an accounts receivable subsidiary ledger?

credit amounts for sales and sales tax payable

Best Computers sold a computer to Lee Jones on credit and issued Sales Slip 211 for $900 plus sales tax of $90. The entry to record this transaction will include a:

credit to sales for $900 credit to sales tax payable for $90 debit to accounts receivable for $990

Sales returns and allowances is a contra revenue account and has a normal

debit balance

A company that purchases goods for resale is called a ____________ company.

merchandising

Gabby Window Supply Co. sold a window to Andy Prose on credit; issued Sales Slip 357 for $800. The entry to record this transaction will include a credit to

sales

Subsidiary ledgers may contain accounts for which of the following:

vendors customers

Which document is necessary to prepare the schedule of accounts receivable?

Accounts receivable subsidiary ledger

A note verifying that a customer's account is being reduced by the amount of a sales return or sales allowance plus any sales tax that may have been involved is called a

Credit memorandum

A company's records showed the following for the month of June: Sales $15,000; Sales Returns and Allowances $3,000; Cost of Goods Sold $4,000. Net sales equal:

12000

Modern Candy, a wholesaler, sold a crate of candy for $360.00 on account to a customer with credit terms of 1/10, n/30. If the customer pays within the discount period, what would be the total amount credited to the sales account?

360.00

Identify the reason(s) that accountants use a sales returns and allowances account:

to keep a complete record of sales returns and allowances to calculate operating efficiency

On July 2, Pinto Inc. sells merchandise for $1,100 on account to Martin Inc. with terms 1/10, n/30. On July 5, Martin returned $200 of merchandise and received a credit memorandum. On July 9, Martin paid the balance owed. The journal entry to record the receipt of the payment will include a credit to:

accounts receivable

On June 2, ADG Inc. sells merchandise for $900 on account to eSales Inc. with terms 1/10, n/30. On June 5, eSales returned $100 of merchandise and received a credit memorandum. On June 9, eSales paid the balance owed in the amount of

792

Sales returns and allowances is a ______ revenue account and has a normal (debit/credit) _______ balance.

contra; debit

Ellis Office Supplies sold a printer to Mary Van on credit; issued Sales Slip 112 for $120. The entry to record this transaction will include a:

debit to accounts receivable for $120 credit to sales for $120

A bike sales company accepted a return of one damaged bike from Sana Gill that was originally sold on credit on Sales Slip 239 for $440, which included sales tax of $40. The return transaction will include which of the following entries:

debit to sales tax payable for $40 debit to sales returns and allowances for $400 credit to accounts receivable for $440

The effect of a sales return on a company's financial statements is a(n):

decrease in net income

A credit policy that is too lenient results in:

increased sales volume accompanied by a high level of losses

Which of the following accounts is credited when recording the portion of sales tax that the state government permits a retailer to keep?

miscellaneous income

The most common types of credit sales include the following:

open-accounts business credit cards cards issued by credit card companies bank credit cards

Which of the following is recorded in an accounts receivable subsidiary ledger?

running balance customer address debits and credits to a customer's accounts receivable

Gabby Window Supply Co. sold a window to Andy Prose on credit; issued Sales Slip 357 for $800. The entry to record this transaction will include a credit to ____.

sales

On July 2, Pinto Inc. sells merchandise for $1,100 on account to Martin Inc. with terms 1/10, n/30. On July 5, Martin returned $200 of merchandise and received a credit memorandum. On July 9, Martin paid the balance owed. The journal entry to record the receipt of the payment will include a debit to:

sales discount cash

Cozy Mattresses sold a mattress set to Gloria Hernandez on credit and issued Sales Slip 193 for $1,000 plus sales tax of $100. The entry to record this transaction will include a credit to:

sales for $1,000

Kelly Pet Supplies sold a crate of cat food to Paws Pet Store on credit; issued Sales Slip 896 for $1,200. The entry to record this transaction will include a credit to:

sales for $1,200

A company's acceptance of a return of goods from a customer is called a

sales return

A window sales company accepted a return of one damaged window from Dorian Lee that was originally sold on Sales Slip 425 for $880, which included sales tax of $80. The return transaction will include a debit to:

sales returns and allowances for $800

A ledger that contains accounts of a single type, such as an account receivable ledgers for each customer, is known as a ___________ ledger.

subsidiary

A discount offered to customers based on volume is known as a ________ discount.

trade

True or false: The accounts receivable account is a control account for the subsidiary ledger.

true