BUS 7 - Quiz 8

Which of the following statements is correct?

Purchases Discounts is a contra expense account with a normal credit balance.

Assuming a periodic inventory system is used, purchases returns and allowances are recorded in the general journal as a debit to Accounts Payable and a credit to __________.

Purchases Returns and Allowances

Which of the following statements is correct?

The credit terms, 2/10, n/30, allow the customer to take a 2 percent discount if payment is made within 10 days of the invoice, otherwise payment is due in full in 30 days.

Why would a supplier offer a sales discount to a customer?

To encourage quick payment by customers.

If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a:

decrease to accounts payable.

Credit terms of 1/10, n/30 mean:

if the invoice is paid within 10 days of its date, a 1% discount may be taken; otherwise the total amount is due in 30 days.

Which of the following would be issued first when goods are purchased?

purchase requisition

The discounts that are offered by suppliers to encourage quick payment of invoices are referred to by customers as __________ discounts.

purchases

A list of creditors and the balances owed to them is called a __________.

schedule of accounts payable

The Purchases Returns and Allowances account is a(n) __________ account.

contra expense

After damaged goods are returned, the supplier issues a(n) __________ memorandum.

credit

When a payment is due is determined by the invoice date and the:

credit terms.

The Freight In account is __________.

an expense account with a normal debit balance

During the year, a firm purchased $144,000 of merchandise and paid freight charges of $12,600. If the total purchases returns and allowances were $9,200 and purchases discounts were $3,300 for the year, what is the net delivered cost of purchases?

$144,100 Explanation $144,000 purchases + $12,600 freight in − $9,200 purchases returns and allowances − $3,300 purchases discounts = $144,100 net delivered cost of purchases

Nadal, Incorporated owes Wozniaki Company $12,860 as of April 1. During April, Nadal, Incorporated purchased $14,280 of merchandise from Wozniaki Company and made payments on account to Wozniaki Company totaling $9,160. The amount Nadal, Incorporated owes Wozniaki Company on April 30 is:

$17,980. Explanation $12,860 beginning balance + $14,280 purchases − $9,160 payments = $17,980 ending balance

On September 1, Jerry's Lighting purchased merchandise with a list price of $8,200 with credit terms of 1/10, n/60; freight of $100 prepaid and added to the invoice. On September 3, Jerry's returns $200 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

$8,020. Explanation $8,200 list price − $200 purchases returns = $8,000 accounts payable $8,000 accounts payable × 0.01 purchases discounts rate = $80 purchases discounts $8,000 accounts payable − $80 purchases discounts + $100 prepaid freight = $8,020 cash payment

Assuming a periodic inventory system is used, identify the statement below that is correct?

Another name that may be used for the Freight In account is "Transportation In."

On October 1, Jerry's Lighting purchased merchandise with a list price of $8,700 with credit terms of 2/15, n/45. On October 3, Jerry's returns $1,700 of the merchandise. Assuming a periodic inventory system is used and Jerry's pays the remaining amount owed on the purchase within the discount period, Jerry's journal entry to record the payment, would include

a debit to Accounts Payable for $7,000. Explanation $8,700 purchase − $1,700 purchases returns and allowances = $7,000 accounts payable $7,000 accounts payable × 0.02 purchases discount rate = $140 purchases discounts $7,000 accounts payable − $140 purchases discounts = $6,860 cash payment

When the sales department needs merchandise, it sends the purchasing department a form called:

a purchase requisition.

Which of the following is prepared to show the quantity and condition of the goods received upon their arrival?

a receiving report

The amount of the purchases for a period is presented in:

the Cost of Goods Sold section of the income statement.