ACC 203- chapter five quiz 3
What does "2/10" mean, with respect to "credit terms of 2/10, n/30"?
A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.
A company that uses the perpetual inventory system purchased inventory for $1,080,000 on account with terms of 4/7, n/20. Which of the following correctly records the payment made 15 days after the date of invoice?
Debit cash: 1,080,000 Credit accounts payable: 1,080,000
A purchase discount is the amount offered to the purchaser for delaying the payment to the seller
False
An invoice is a request for payment from the purchaser.
False
Purchase discounts are calculated on the amount of the merchandise purchased including freight costs.
False
The Merchandise Inventory account is an expense account that is used for goods purchased that the business owns and intends to resell to customers, as well as for purchases of office supplies and equipment.
False
The Merchandise Inventory account is an expense account that is used only for goods purchased that the business owns and intends to resell to customers.
False
Credit terms of a merchandising company are 1/15, net 40. This means that the buyer can receive a discount of 1% if the invoice is paid within 40 days of the invoice date.
False: Credit terms of a merchandising company are 1/15, net 40. This means that the buyer can receive a discount of 1% if the invoice is paid within 40 days of the invoice date.
When a company uses the perpetual inventory system ________.
The merchandise Inventory account is debited for purchases of goods that the company intends to resell to customers
An invoice can be either a sales invoice or a purchase invoice.
True
An invoice is also known as a bill.
True
Centennial Company sold goods on credit terms n/20 to Harper Company. This means no discounts are offered, and the amount of the invoice is due 20 days after the invoice date.
True
Credit terms of 2/10, n/30 indicate that a discount of 2% will be given if payment is made within 10 days of the invoice date. Otherwise, the total invoice amount is due within 30 days of the invoice date.
True
The Merchandise Inventory account is an asset account that is used only for goods purchased that the business owns and intends to resell to customers
True
The purchase discount amount is calculated on the amount of the invoice minus the returns and allowances
True
Under the perpetual inventory system, when a purchaser makes payment within the discount period, the amount of discount will be credited to the Merchandise Inventory account.
True
A company that uses the perpetual inventory system purchases inventory for $64,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days?
a debit to Accounts Payable for $64,000, a credit to Merchandise Inventory for $1280, and a credit to Cash for $62,720