Chap. 8 Quiz

Which of the following statements is true?

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.

Nadal, Incorporated owes Wozniaki Company $13,560 as of April 1. During April, Nadal, Incorporated purchased $14,350 of merchandise from Wozniaki Company and made payments on account to Wozniaki Company totaling $9,860. The amount Nadal, Incorporated owes Wozniaki Company on April 30 is:

$13,560 beginning balance + $14,350 purchases − $9,860 payments = $18,050 ending balance

A firm had purchases of $23,800, freight charges of $1,100, and purchases returns and allowances of $1,450 during one month. Its net delivered cost of purchases was

$23,800 purchases + $1,100 freight charges − $1,450 purchases returns and allowances = $23,450 net delivered cost of purchases

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

Answer 3%

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

Answer Control

Credit terms of 1/10, n/30 means

Answer 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.

On February 16, Gourmet Cakes purchased $7,400 of merchandise on account from JB Baking. Credit terms of the purchase were 3/10, n/60. On February 24, Gourmet Cakes pays the amount owed. Assuming Gourmet Cakes uses a perpetual inventory system, the journal entry on February 24, to record the payment, would be:

Answer Option A Explanation: $7,400 purchase × 0.03 purchases discount rate = $222 purchases discount$7,400 purchase − $222 purchases discount = $7,178 cash payment

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

Answer: Credit

Assuming a periodic inventory system, the journal entry to record the purchase on account of $1,070 of merchandise with freight of $150 prepaid and added to the invoice is:

Explanation $1,070 purchases + $150 freight in = $1,220 accounts payable Answer: debit Purchases $1,070, debit Freight In $150; credit Accounts Payable $1,220.

On September 1, Jerry's Lighting purchased merchandise with a list price of $17,400 with credit terms of 2/10, n/30. On September 3, Jerry's returns $1,900 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

Explanation $17,400 list price − $1,900 purchases return = $15,500 accounts payable $15,500 accounts payable × 0.02 purchases discounts rate = $310 purchases discount $15,500 accounts payable − $310 purchases discounts = $15,190 cash payment

A firm had purchases of $17,800, freight charges of $380, and purchases returns and allowances of $1,900 during one month. Its net delivered cost of purchases was

Explanation $17,800 purchases + $380 freight charges − $1,900 purchases returns and allowances = $16,280 net delivered cost of purchases

During March a firm purchased $22,720 of merchandise and paid freight charges of $1,790. If the net delivered cost of purchases for the March is $21,970, what are the total purchases returns and allowances for March (assuming that there were no purchases discounts)?

Explanation $22,720 purchases + $1,790 freight in − $21,970 net delivered cost of purchases = $2,540 purchases returns and allowances

During the year, a firm purchased $256,400 of merchandise and paid freight charges of $41,740. If the total purchases returns and allowances were $15,890 and purchases discounts were $8,350 for the year, what is the net delivered cost of purchases?

Explanation $256,400 purchases + $41,740 freight in − $15,890 purchases returns and allowances − $8,350 purchases discounts = $273,900 net delivered cost of purchases.

During the year, a firm purchased $57,250 of merchandise and paid freight charges of $12,600. If the total purchases returns and allowances were $6,595 and purchases discounts were $2,070 for the year, what is the net delivered cost of purchases?

Explanation $57,250 purchases + $12,600 freight in − $6,595 purchases returns and allowances − $2,070 purchases discounts = $61,185 net delivered cost of purchases

On September 1, Jerry's Lighting purchased merchandise with a list price of $7,600 with credit terms of 1/10, n/30. On September 3, Jerry's returns $900 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

Explanation $7,600 list price − $900 purchases return = $6,700 accounts payable $6,700 accounts payable × 0.01 purchases discounts rate = $67 purchases discount $6,700 accounts payable − $67 purchases discounts = $6,633 cash payment

On September 1, Jerry's Lighting purchased merchandise with a list price of $8,100 with credit terms of 2/10, n/30. On September 3, Jerry's returns $1,300 of the merchandise. If payment is made within the discount period, the total amount paid by Jerry's Lighting is:

Explanation $8,100 list price − $1,300 purchases return = $6,800 accounts payable $6,800 accounts payable × 0.02 purchases discounts rate = $136 purchases discount $6,800 accounts payable − $136 purchases discounts = $6,664 cash payment ​

Tune Tone Instrument tuning Company owes Mandy Lynn's Music Studio $3,300 as of November 1. During November, Tune Tones purchased merchandise from Mandy Lynn totaling $5,200 and made a payments on account to Mandy Lynn in the amount of $2500. the amount Tune Tones owes Mandy Lynn on November 30 is:

Explanation $3,300 beginning balance + $5,200 purchases - $2,500 payments= $6,000

Assuming a periodic inventory system is used, the journal entry to record the purchase of merchandise on account for $5,800 with freight of $400 prepaid and added to the invoice is:

Explanation $5,800 purchases + $400 freight in = $6,200 accounts payable Answer: debit Purchase $5,800; debit Freight In; credit $6,200

On September 1 Jerry's Lighting purchased merchandise with a list price of $12,500 with credit.tems of 3/5 n/60 On September 3. Jerry's returns S1,300 of the merchandisefpaymentis.made within the discount period the total amount paid by Jerry's Lighting is

Explanation $12,500 list price- S1,300 purchases returns = $11,200 accounts payable $11,200 acounts payable x 0.03 pur chases discounts rate = S336 purchases discount $11,200 accounts payable-S336 purchases discounts = $10,864 cash payment

On January 3, Gourmet Cakes sold $15,000 of merchandise, on account with terms 2/10, n/30, to Jerry Hines. Assuming that the original cost of the merchandise to Gourmet Cakes was $4,000 and the perpetual inventory system is used, the journal entry on January 3, to record the sale, would be: A) Sales Accounts Receivable/J.Hines B) Accounts Receivable/J.Hines Sales Cost of Goods Sold Merchandise Inventory Sales Cost of Goods Sold Merchandise Inventory C) Accounts Payable/J.Hines Sales Merchandise Inventory Cost of Goods Sold. Sales Cost of Goods Sold Merchandise Inventory D) Accounts Receivable/J. Hines Sales Cost of Goods Sold

Option B.