Chapter 8

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

On May 4, Roscoe Grocery received merchandise costing $3,500 with freight charges of $200 paid by the supplier and added to the invoice, terms 2/10, n/30. Some goods were returned, and, on May 11, the supplier issued a credit memo in the amount of $400. Roscoe paid the amount due on May 14 and recorded the transaction with a debit to:

accounts payable

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 $1,000 plus a freight charge of $100 from a supplier, payment is due in 30 days. The $100 freight charge will be recorded as a (debit/credit) _______ to the _______ account.

debit; freight in

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

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.

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

purchase 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

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

true

A company that uses the periodic inventory system purchases merchandise inventory for $1,000 plus freight of $100 from Sunny Supplier Co., with credit terms 2/10, n/30. The company will record this transaction with a debit to:

purchases for $1,000 freight in for $100

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

receiving

A company that uses the periodic inventory system purchases merchandise inventory for $800 plus freight of $80 from Sunday Supplier Co., with credit terms 2/10, n/30. The company will record this transaction with debits and/or credits to the following accounts:

credit to accounts payable for $880 debit to purchases for $800 debit to freight in for $80

A company that uses the periodic inventory system purchases merchandise inventory for $500 plus freight of $50 from Sunny Supplier Co., with credit terms 2/10, n/30. The company will record this transaction with a debit to:

purchases for $500

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

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 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

On May 4, Roscoe Grocery received merchandise costing $3,500 with freight charges of $200 paid by the supplier and added to the invoice, terms 2/10, n/30. Some goods were returned, and, on May 11, the supplier issued a credit memo in the amount of $400. Roscoe paid the amount due on May 14 and recorded the transaction with credits to

cash purchases discounts

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:

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

On April 8, Party Time received merchandise costing $1,500 with freight charges of $100 paid by the supplier and added to the invoice, terms 2/10, n/30. Some goods were returned, and, on April 11, the supplier issued a credit memo in the amount of $400. On April 17, Party Time wrote a check for the amount due of

1178

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 Purchases$ 2,000Less: Returns and allowances$ (600)Less: Purchase discounts$ (28)Add: Freight$ 125Net cost of purchases$ 1497

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

Blank 1: accounts Blank 2: payable

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

Blank 1: contra Blank 2: credit

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

Blank 1: receiving report

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

Blank 1: sales Blank 2: invoice

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

Blank 1: freight or transportation Blank 2: in