Financial Accounting Exam #2

Credit terms of 2/10, n/30 indicate that a a. 2% discount for early payment is available if the invoice is paid before the tenth day of the month following the month to of sale b. 2% discount for early payment is available within ten days of the date of sale c. 10% discount for early payment is available if the invoice is paid within two days of the date of the invoice d. 2% discount for early payment is available if the invoice is paid after the tenth day, but before the thirtieth day of the invoice date

2% discount for early payment is available within ten days of the date of sale

Brendan Company sold merchandise worth $1600 on credit, terms n/15. The merchandise sold had cost $1100. What is the required journal entry to record the transaction under the perpetual inventory system? a. Accounts Receivable 1600 Sales 1600 Cost of goods Sold 1100 Merchandise Inv 1100 b. Sales 1600 Accounts Receivable 1600 Merchandise Inv 1100 COGS 1100 c. Accounts Receivable 1600 Merchandise Inv 1600 COGS 1100 Merchandise Inv 1100 d. Merchandise Inv 1600 Sales 1600 COGS 1100 Merchandise Inv 1100

Accounts Receivable 1600 dr Sales 1600 cr Cost of goods Sold 1100 dr Merchandise Inv 1100 cr

True or False: A $100 petty cash fund has cash of $14 and valid receipts for $75. The amount to replenish the fund is $25

False

True or False: Sales Discounts and Sales Returns and Allowances have normal credit balances

False

Under the perpetual inventory system, which of the following accounts would not be used? a. Cost of goods sold b. Merchandise Inventory c. Sales Returns and Allowances d. Purchases Discounts

Purchases Discounts

True or False: Cost of goods sold is a type of expense

True

True or False: The net cost of purchases is found by adding freight-in to net purchases

True

A check for $235 is incorrectly recorded by a company as $253. On the bank reconciliation the error should: a. be deducted from the balance per bank b. be deducted from the balance per books c. be added to the balance per bank d. be added to the balance per books

be added to the balance per books

The amount of costs of goods available for sale during the year depends on the amounts of a. beginning merchandise inventory, net cost of purchases, and ending merchandise inventory b. beginning merchandise inventory and cost of goods sold c. beginning merchandise inventory, cost of goods sold, and ending merchandise inventory d. beginning merchandise inventory and net cost of purchases

beginning merchandise inventory and net cost of purchases

The entry to record the purchase on account of merchandise for resale under the periodic inventory system includes a. debiting purchases and crediting cash b. debiting purchases and crediting accounts payable c. debiting merchandise inventory and crediting cash d. debiting merchandise inventory and crediting accounts payable

debiting purchases and crediting accounts payable

Which of the following would be added to the bank balance? a. outstanding checks b. collection of a note by the bank c. interest income paid by the bank d. deposits in transit

deposits in transit

Which of the following goods would not be included in merchandise inventory for a purchasing company? a. goods in transit shipped FOB shipping point b. goods on hand in the showroom c. goods in transit shipped FOB destination d. goods ordered and received from the supplier

goods in transit shipped FOB destination

The entry to record a sales return from a customer would require a(n): a. decrease to sales b. increase to sales c. decrease to sales returns and allowances d. increase to sales returns and allowances

increase to sales returns and allowances

Under the perpetual inventory system, the entry to record a purchase return would include a credit to which account? a. merchandise inventory b. purchases returns and allowances c. accounts payable d. sales

merchandise inventory

Under the periodic inventory system a. the cost of each item is recorded in the Merchandise Inventory account when it is purchased b. when an inventory item is sold, its cost is transferred to the Cost of Goods Sold account c. the balance of the merchandise inventory account equals the cost of goods on hand d. the balance of the merchandise inventory account is only accurate on the balance sheet date

the balance of the merchandise inventory account is only accurate on the balance sheet date