CH8-Accounting for purchases

If Gordon Company purchases merchandise on account and the invoice includes freight and the price of goods, the journal entry to record this will affect how many accounts?

Three

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

To encourage quick payment by customers.

Which of the following is an objective of internal control of purchases?

To ensure that different people are involved in the process of buying goods, receiving goods, and making payments.

In a small firm, the creditor accounts are placed in __________ order in the accounts payable ledger.

alphabetical

Detailed information about the individual accounts for all creditors is provided by:

an accounts payable ledger.

The form sent to the supplier to order goods is called a(n) __________.

purchase order

Which of the following specifies the exact items, quantity, price, and credit terms for a merchandise purchase, and is signed by someone with authority to approve purchases?

purchase order

When a sales department needs goods, it sends a form called a(n) __________ to the purchasing department.

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

Good internal control requires a(n) __________ of duties.

separation

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

the Cost of Goods Sold section of the income statement.

The source document for recording a purchase of merchandise on credit is:

the purchase invoice.

Billy's Bobcat Sales Co. owes Machinery Supply House $7,300 as of April 1. During April, Billy's Bobcats purchased merchandise from Machinery Supply House totaling $13,600 and owes Machinery Supply House $4,300 on April 30. The total payments made by Billy's Bobcat to Machinery Supply House during April were:

$16,600

During March a firm purchased $22,750 of merchandise and paid freight charges of $1,820. If the net delivered cost of purchases for the March is $22,000, what are the total purchases returns and allowances for March (assuming that there were no purchases discounts)?

$2,570

A firm had purchases of $10,000, freight charges of $1,100, and purchases returns and allowances of $2,400 during one month. Its net delivered cost of purchases was:

$8,700

Which of the following cash discounts is being offered if the credit terms are 3/10, n/60?

3%

The entry to record payment of an invoice for the purchase of merchandise within the discount period includes:

A debit to Accounts Payable, a credit to Purchases Discounts, and a credit to Cash.

The entry to record a purchase allowance granted on a credit memo includes a debit to the __________ account in the general ledger.

Accounts Payable

Hugh Snow, the buyer, returned merchandise to Farley Company, the seller. The entry on the books of Hugh Snow to record the return of merchandise assuming a periodic inventory system is used, would include a:

Credit to Purchases Returns and Allowances.

Which of the following is not a common element of an effective system of internal control of purchases?

Proper authorization for purchases is obtained after all purchases over an agreed-upon dollar value have been completed.

Felix Company purchased goods with a list price of $2,000, and was offered trade discounts of 25% and 15% respectively. What amount will be credited to Purchases Discounts in the entry to record this purchase?

Purchases Discounts will not be included in this journal entry

The net delivered cost of purchases is calculated as follows:

Purchases plus Freight In less Purchases Returns and Allowances less Purchases Discounts.

The total of the individual creditor accounts on the schedule of accounts payable must equal which of the following?

The balance of the Accounts Payable control account in the general ledger.

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.

The entry to record a purchase allowance granted on a credit memorandum includes:

a debit to Accounts Payable and a credit to Purchases Returns and Allowances.

A balance with parentheses ( ) around the amount indicates:

a non-normal or negative balance.

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 Purchases account is:

a temporary account.

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

contra expense

The Purchases Discounts account is a(n):

contra expense account.

When an accounts payable subsidiary ledger is used, the Accounts Payable account in the general ledger becomes a(n) __________ account.

control

The__________ is (are) the cost to the business of the merchandise sold to customers.

cost of goods sold

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.

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

What type of account is Freight In?

expense

Transportation In is a(n) __________.

expense account that impacts the cost of goods sold section on the income statement.

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.