1.

If a retail business distributes a coupon through a newspaper, no liability (journal entry) is recorded at the time of
issue.

True

False

2. Buyers and sellers do not normally record the list prices of merchandise and the trade discounts in accounts.

True

False

3. In a perpetual inventory system, the inventory account is only used to reflect the beginning inventory.

True

False

4. Freight in is the amount paid by the company to deliver merchandise sold to a customer.

True

False

5. Freight in is considered a cost of purchasing inventory.

True

False

6. The cost of inventory is limited to the purchase price less any purchases discounts.

True

False

7. Under the perpetual inventory system, when a sale is made, both the sale and cost of goods sold are recorded.

True

False

8. If payment is due by the end of the month in which the sale is made, the invoice terms are expressed as n/30.

True

False

9. When merchandise that was sold is returned, a credit to Customer Refunds Payable is made.

True

False

10. In a perpetual inventory system, when merchandise is returned to the supplier, Cost of Goods Sold is debited as
part of the transaction.

True

False
11. Customer Refunds Payable is an account used to record expected merchandise returns from customers.

True

False

12. Estimated Returns Inventory is an account used when adjusting for expected merchandise returns in the next
period.

True

False

13. Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales.

True

False

14. Most retailers record all credit card sales as credit sales.

True

False

15. The fees associated with credit card sales are periodically recorded as expenses.

True

False

16. Inventory normally has a debit balance.

True

False

17. A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take
advantage of the sales discount.

True

False

18. In a perpetual inventory system, merchandise returned to vendors reduces the inventory account.

True

False

19. Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. The entry to
journalize the purchase will include a debit to Cash and a credit to Sales.

True

False

20. Purchases of merchandise are typically credited to the inventory account under the perpetual inventory system.

True

False
21. Even if borrowing has to be done to pay within the discount period, it is generally advantageous for the buyer to
take advantage of purchases discounts.

True

False

22. When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade
discount.

True

False

23. A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called a cash
discount.

True

False

24. Sellers and buyers are required to record trade discounts.

True

False

25. If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the
terms are stated as FOB destination.

True

False

26. A sale of $750 on account subject to a sales tax of 6% would be recorded as an account receivable of $750.

True

False

27. When merchandise is sold for $600 plus 6% sales tax, the sales account should be credited for $636.

True

False

28. The abbreviation FOB stands for "free on board."

True

False

29. If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination.

True

False

30. When the terms of sale are FOB shipping point, the buyer pays the freight charges.

True

False
31. Merchandise costing $3,500 is purchased with terms FOB destination, 2/10, n/30, with prepaid freight costs of
$125. If payment is made within 10 days, the amount of the purchases discount is $70.

True

False

32. The chart of accounts for a retail business would include an account called Delivery Expense.

True

False

33. When companies use a perpetual inventory system, journalizing the purchase of inventory will include a debit to
Purchases.

True

False

34. Most companies will not take a purchases discount, because 1% or 2% discounts are insignificant.

True

False

35. The seller may prepay the freight costs even though the terms are FOB shipping point.

True

False

36. The seller records the sales tax as part of the sales amount.

True

False

37. Title to merchandise shipped FOB shipping point passes to the buyer upon delivery of the merchandise to the
buyer's place of business.

True

False

38. Purchased goods in transit, shipped FOB destination, should be excluded from ending inventory of the buyer.

True

False

39. Because many companies use computerized accounting systems, periodic inventory is widely used.

True

False

40. If the perpetual inventory system is used, an account entitled Cost of Goods Sold is included in the general ledger.

True

False
41. Purchased goods in transit should be included in the ending inventory of the buyer if the goods were shipped FOB
shipping point.

True

False

42. The inventory system employing accounting records that continuously disclose the amount of inventory is called

a. periodic

b. physical

c. perpetual

d. retail

43. On May 1, Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms net 45. The cost of the goods
sold was $19,500. The entry to journalize the sale will include a

a. debit to Accounts Receivable for $25,500

b. credit to Sales for $19,500

c. credit to Accounts Receivable for $19,500

d. debit to Sales for $25,500

44. The primary difference between the periodic and perpetual inventory systems is that a

a. periodic system keeps a record showing the inventory on hand at all times

b. periodic system provides an easy means to determine inventory shrinkage

c. periodic system determines the inventory on hand only with a physical count at the end of the accounting period

d. periodic system records the cost of the sale on the date the sale is made

45. Using a perpetual inventory system, the entries to journalize the sale of merchandise on account and the
corresponding cost of goods sold include a

a. credit to Inventory

b. debit to Inventory

c. debit to Sales

d. credit to Accounts Receivable

46. Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared,
dated, and mailed by the seller on November 13 with credit terms of n/30; the merchandise is received by the buyer
on November 18; and the entry is made in the buyer's accounts on November 20. The credit period begins with what
date?

a. November 13

b. November 18
c. November 10

d. November 20

47. Using a perpetual inventory system, the entry to journalize the return from a customer of merchandise sold on
account includes a

a. debit to Cash

b. credit to Customer Refunds Payable

c. debit to Inventory

d. credit to Inventory

48. If merchandise sold on account is returned to the seller, the seller acknowledges the return by issuing a

a. purchase invoice

b. credit memo

c. sales invoice

d. debit memo

49. The arrangements between buyer and seller as to when payments for merchandise are to be made are called

a. gross cash

b. credit terms

c. cash on demand

d. net cash

50. In credit terms of 3/15, n/45, the "3" represents the

a. percent of the purchases discount

b. full amount of the invoice

c. number of days in the discount period

d. number of days when the entire amount is due

51. Which of the following accounts has a normal credit balance?

a. Accounts Receivable

b. Delivery Expense

c. Inventory

d. Sales
52. The entry to journalize the return of merchandise from a customer would include a

a. debit to Customer Refunds Payable

b. debit to Estimated Returns Inventory

c. debit to Sales

d. credit to Sales

53. Sales to customers who use bank credit cards such as MasterCard and VISA are usually journalized by a

a. debit to Sales, a debit to Credit Card Expense, and a credit to Cash

b. debit to Cash, a credit to Credit Card Expense, and a credit to Sales

c. debit to Bank Credit Card Sales, a debit to Credit Card Expense, and a credit to Sales

d. debit to Cash and a credit to Sales

54. Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as

a. cash sales

b. sales on account

c. sales returns

d. sales when the credit card company remits the cash

55. When a buyer returns merchandise purchased for cash, the buyer will journalize the transaction as a

a. debit to Cash and a credit to Inventory

b. debit to Inventory and a credit to Cash

c. debit to Sales and a credit to Accounts Payable

d. debit to Cash and a credit to Sales

56. When merchandise purchased on account is returned under the perpetual inventory system, the buyer will debit

a. Accounts Receivable

b. Purchases Returns and Allowances

c. Inventory

d. Accounts Payable

57. When purchases of merchandise are made on account with a perpetual inventory system, the transaction is
journalized with which entry?

a. debit Inventory and credit Purchases

b. debit Inventory and credit Cash Discounts

c. debit Inventory and credit Accounts Payable

d. debit Accounts Payable and credit Inventory

58. Using a perpetual inventory system, the entry to journalize the purchase of $30,000 of merchandise on account
would include a

a. debit to Accounts Payable

b. credit to Inventory

c. debit to Inventory

d. credit to Sales

59. Using a perpetual inventory system, the entry to journalize the return of merchandise purchased on account
includes a

a. credit to Sales

b. credit to Inventory

c. credit to Accounts Payable

d. debit to Cost of Goods Sold

60. In recording the cost of goods sold for cash, based on data available from perpetual inventory records, the journal
entry would

a. debit Inventory and credit Cost of Goods Sold

b. debit Cost of Goods Sold and credit Inventory

c. debit Accounts Receivable and credit Inventory

d. debit Cost of Goods Sold and credit Sales

61. The amount of the total cash paid to the seller for merchandise purchased for consumption would normally
include

a. the list price plus the sales tax

b. only the list price

c. only the sales tax

d. the list price less the sales tax

62. Norfolk Sporting Goods purchases merchandise with a catalog list price of $30,000. The retailer receives a 30%
trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the inventory account?

a. $30,000

b. $21,000

c. $29,400
d. $20,580

63. Norfolk Sporting Goods purchases merchandise with a catalog list price of $14,272. The retailer receives a 36%
trade discount and credit terms of 2/10, n/30. What amount should Norfolk debit to the Inventory account? Round
your answer to the nearest whole dollar.

a. $8,951

b. $19,227

c. $14,272

d. $9,134

64. An invoice received included the following information: merchandise price, $12,000; terms 1/10, n/eom; FOB
shipping point with prepaid freight of $900. Assuming that a credit for merchandise returned of $500 is granted prior
to payment and that the invoice is paid within the discount period, what amount of cash should be paid by the
buyer?

a. $11,385

b. $12,285

c. $10,480

d. $11,500

65. An invoice received included the following information: merchandise price, $5,700; terms 1/10, n/eom; FOB
shipping point with prepaid freight of $556. Assuming that a credit for merchandise returned of $1,100 is granted
prior to payment and that the invoice is paid within the discount period, what amount of cash should be paid by the
buyer?

a. $5,110

b. $5,700

c. $6,193

d. $1,100

66. Which of the following accounts usually has a debit balance?

a. Inventory

b. Sales

c. Accounts Payable

d. Sales Tax Payable

67. Merchandise is sold for cash. The selling price of the merchandise is $6,000, and the sale is subject to a 7% state
sales tax. The entry to journalize the sale would include a credit to

a. Sales for $5,580

b. Sales for $6,420

c. Cash for $6,000

d. Sales Tax Payable for $420

68. Merchandise is sold for cash. The selling price of the merchandise is $1,400, and the sale is subject to a 5% state
sales tax. The entry to journalize the sale would include a credit to

a. Sales Tax Payable for $70

b. Sales for $1,470

c. Cash for $1,400

d. Cash for $1,470

69. If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as

a. FOB destination

b. FOB buyer

c. FOB shipping point

d. FOB n/30

70. If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

a. FOB seller

b. FOB destination

c. FOB shipping point

d. FOB n/30

71. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a. consigned

b. FOB shipping point

c. FOB destination

d. n/30

72. When goods are shipped FOB destination and the seller pays the freight charges, the buyer

a. journalizes a reimbursement to the seller

b. journalizes a reduction for the cost of the merchandise

c. makes no journal entry for the freight

d. does not take a discount

73. Pierce Company sold merchandise on account to Stanton Company, terms FOB shipping point, n/ 30, for $20,000.
Pierce prepaid the $500 shipping charge. Which of the following entries does Pierce make to journalize this sale?
a. debit Accounts Receivable—Stanton Company for $20,000; credit Sales for $20,000 and debit Delivery Expense for
$500; credit Cash for $500

b. debit Accounts Receivable—Stanton Company for $20,500; credit Sales for $20,500

c. debit Accounts Receivable—Stanton Company for $20,000; credit Sales for $20,000 and debit Accounts Receivable
—Stanton Company for $500; credit Cash for $500

d. debit Accounts Receivable—Stanton Company for $20,000; credit Sales for $20,000

74. Pierce Company sold merchandise on account to Stanton Company, terms FOB shipping point, n/30, for $20,000.
Pierce prepaid the $300 shipping charge. Which of the following entries does Pierce make to journalize this sale?

a. debit Accounts Receivable—Stanton Company for $20,300; credit Sales for $20,300

b. debit Accounts Receivable—Stanton Company for $20,000; credit Sales for $20,000

c. debit Accounts Receivable—Stanton Company for $20,000; credit Sales for $20,000 and debit Accounts Receivable
—Stanton Company for $300; credit Cash for $300

d. debit Accounts Receivable—Stanton Company for $20,000; credit Sales for $20,000 and debit Delivery Expense for
$300; credit Cash for $300

75. Emma Co. sold merchandise on account to Isabella Co., terms FOB shipping point, 2/10, /30, for $15,000. Emma
Co. prepaid the $750 shipping charge. Using the perpetual inventory method, which of the following entries will
Isabella Co. make to journalize the payment for the merchandise if it pays within the discount period?

a. debit Accounts Payable—Emma Co. for $15,750; credit Inventory for $300; credit Cash for $15,450

b. debit Accounts Payable—Emma Co. for $15,000; credit Cash for $15,000

c. debit Accounts Payable—Emma Co. for $15,000; debit Freight In for $750; credit Cash for $15,750

d. debit Accounts Payable—Emma Co. for $15,450; credit Cash for $15,450

76. Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise.
Under a perpetual inventory system, which of the following journal entries would be made?

a. debit Cash for $2,000; credit Sales for $2,000 and debit Cost of Goods Sold for $1,250; credit Inventory for $1,250

b. debit Cash for $1,250; credit Sales for $1,250

c. debit Accounts Receivable for $2,000; credit Sales for $2,000 and debit Cost of Goods Sold for $1,250; credit
Inventory for $1,250

d. debit Cash for $2,000; credit Inventory for $1,250

77. Jacob Co. purchases merchandise on account from Isaiah Co. for $9,700, receiving an invoice dated May 1 with
terms 1/15, net 45. What is the amount of the available purchases discount, and by what date must the invoice be
paid in order for Jacob Co. to take advantage of the discount?

a. $97, May 16

b. $97, May 15

c. $194, May 16
d. $194, May 15

78. Kaden Co. purchases merchandise on account from Jase Co. for $9,600, receiving an invoice dated July 15 with
terms 1/15, net 45. If Kaden Co. chooses not to take the discount, by what date must the payment be made?

a. August 15

b. August 29

c. July 30

d. July 25

79. Taking advantage of a 2/10, n/30 purchases discount is equal to a yearly savings rate of approximately

a. 36%

b. 24%

c. 2%

d. 20%

80. Who is responsible for the freight costs when the terms are FOB shipping point?

a. the seller

b. the ultimate customer

c. the buyer

d. either the seller or the buyer

81. Who is responsible for the freight cost when the terms are FOB destination?

a. the ultimate customer

b. either the buyer or the seller

c. the buyer

d. the seller

82. A retailer purchases merchandise with a catalog list price of $30,000. The retailer receives a 15% trade discount
and has credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the discount period?

a. $24,990

b. $24,900

c. $30,000

d. $29,400

83. What type of company would normally offer trade discounts to its customers?
a. retailer

b. wholesaler

c. service company

d. online retailer

84. Which of the following accounts will only be found in the chart of accounts of a retail business?

a. Accounts Payable

b. Accounts Receivable

c. Inventory

d. Sales

85. Which of the following items would not affect the cost of inventory purchased during the period?

a. quantity discounts

b. sales commissions

c. freight in

d. purchases discounts

86. If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are

a. consigned

b. n/30

c. FOB shipping point

d. FOB destination

87. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

a. consigned

b. FOB destination

c. n/30

d. FOB shipping point

88. Under the perpetual inventory system, all purchases of merchandise are debited to

a. Inventory Available for Sale

b. Inventory

c. Cost of Goods Sold

d. Purchases
89. When the perpetual inventory system is used, the inventory sold is debited to

a. Cost of Goods Sold

b. Supplies Expense

c. Sales

d. Inventory

90. Under a perpetual inventory system,

a. the purchases returns and allowances account is credited when goods are returned to vendors

b. accounting records continuously disclose the amount of inventory

c. there is no need for a year-end physical count

d. increases in inventory resulting from purchases are debited to Purchases

91. The entry to journalize the receipt of inventory purchased for cash in a perpetual inventory system would be
a.
Account Debit Credit
Purchases 1,500
Accounts Payable 1,500
b.
Account Debit Credit
Cash 1,500
Accounts Receivable 1,500
c.
Account Debit Credit
Inventory 1,500
Cash 1,500
d.
Account Debit Credit
Office Supplies 1,500
Cash 1,500

92. Which of the following items should not be included in the cost of ending inventory?

a. purchased units in transit, shipped FOB shipping point

b. units on hand in the warehouse

c. purchased units in transit, shipped FOB destination

d. sold units in transit, not invoiced, and shipped FOB destination

93. Corbit Company sold merchandise for $10,000 cash. The cost of the goods sold was $7,590. The entries to
journalize this transaction under the perpetual inventory system would be
a.

Account Debit Credit

 Cash 7,590
Sales 7,590
Cost of Goods Sold 7,590
Inventory 7,590
b.

Account Debit Credit

Cash 10,000
Sales 10,000
Cost of Goods Sold 10,000
Inventory 10,000
c.

Account Debit Credit

Cash 10,000
Sales 10,000
Cost of Goods Sold 7,590
Inventory 7,590
d.

Account Debit Credit

Cash 10,000
Inventory 10,000
Cost of Goods Sold 7,590
Sales 7,590

94. Abbey Co. sold merchandise to Gomez Co. on account, $35,000, terms n/45. The cost of the goods sold was
$24,500. Abbey Co. issued a credit memo for $3,600 for merchandise returned that originally cost $1,700. What is
the amount of gross profit earned by Abbey Co. on these transactions?

a. $31,400

b. $10,500

c. $8,600

d. $30,772

95. Abbey Co. sold merchandise to Gomez Co. on account, $32,100, terms 2/15, n/45. The cost of the goods sold was
$13,930. Abbey Co. issued a credit memo for $3,900 for merchandise returned that originally cost $1,318. What is
the amount of gross profit earned by Abbey Co. on these transactions?

a. $15,588

b. $3,900

c. $12,612

d. $18,846

96. Merchandise is purchased for $6,000 on September 2, terms 2/10, n/30, FOB destination. Freight costs paid by
the seller total $200. What is the required payment if paid on September 12?

a. $6,090
b. $6,120

c. $5,880

d. $5,940

97. Travis Company purchased merchandise on account from a supplier for $5,700, terms 2/10, net 30. Travis
Company paid for the merchandise within the discount period.

Under a perpetual inventory system, journalize the entries required for these transactions. If an amount box does not
require an entry, leave it blank.

98. Travis Company purchased merchandise on account from a supplier for $8,400, terms 2/10, net 30. Travis
Company paid for the merchandise within the discount period.

Under a perpetual inventory system, journalize the entries required for these transactions

99. On March 25, Osgood Company sold merchandise on account, $10,000, terms n/30. The applicable sales tax
percentage is 7.5%.

Journalize this transaction.

100. On March 25, Osgood Company sold merchandise on account, $2,100, terms n/30. The applicable sales tax
percentage is 7%.

Journalize this transaction.

101.j ournalize the following merchandise transactions. The company uses the perpetual inventory system.

Question Content Area

a. Sold merchandise on account, $17,300, with terms n/30. The cost of the merchandise sold was $12,600. If an
amount box does not require an entry, leave it blank.

blank Account Debit Credit

Accounts
ReceivableAccounts
blank PayableCashSales
DiscountsSales Tax
Payable

Accounts
ReceivableAccounts
PayableCashSalesSales
Tax Payable

blank Accounts
PayableCashCost of
 Goods
SoldInventorySales
Discounts

Accounts
PayableCashCost of
Goods
SoldInventorySales
Discounts

Question Content Area

b. Received payment. If an amount box does not require an entry, leave it blank.

blank Account Debit Credit

Accounts
ReceivableCashCost
of Goods
SoldInventorySales

Accounts
ReceivableCashCost
of Goods
SoldInventorySales

102. Sold merchandise on account, $12,500, with terms n/30. The cost of the merchandise sold was $8,125. If an
amount box does not require an entry, leave it blank.

blank Account Debit Credit

Accounts
PayableAccounts
blank
ReceivableCashSalesSales
Discounts

Accounts
ReceivableCashCost of
Goods SoldSalesSales
Discounts

Accounts
PayableCashCost of
blank
Goods SoldInventorySales
Discounts

Accounts
PayableCashCost of
Goods SoldInventorySales
Discounts
Question Content Area

b. Received payment. If an amount box does not require an entry, leave it blank.

blank Account Debit Credit

Accounts
ReceivableCashCost
blank
of Goods
SoldInventorySales

Accounts
ReceivableCashCost
of Goods
SoldInventorySales

103. Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and
allowances was received prior to payment and that all invoices were paid within the discount period.

Freight Paid Returns and

Item
Merchandise by Seller Freight Terms Allowances

a. $4,500 $140 FOB Shipping Point, 2/10, net 30 $1,200

b. $7,650 $200 FOB Destination, 1/10, net 45 $450

Determine the amount to be paid in full settlement of each invoice.

a. fill in the blank 1 of 2$
b. fill in the blank 2 of 2$

104. Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and
allowances was received prior to payment and that all invoices were paid within the discount period.

Freight Paid Returns and

Item
Merchandise by Seller Freight Terms Allowances

a. $11,300 $218 FOB Shipping Point, 1/10, net 30 $1,100

b. $5,500 $58 FOB Destination, 2/10, net 45 $1,200

Determine the amount to be paid in full settlement of each invoice.

a. fill in the blank 1 of 2$
b. fill in the blank 2 of 2$

131. What amount will be paid in full settlement of Invoice 22384, assuming that credit for returns and allowances
was received prior to payment and that the invoice was paid within the discount period.
Inv. No. Merchandise Freight Paid by Seller Freight Terms Returns and Allowances

FOB shipping point,

22384 $4,500 $140 $1,200
2/10, net 30

a. $4,640

b. $3,374

c. $3,440

d. $3,234

132. What amount will be paid in full settlement of Invoice 22392, assuming that credit for returns and allowances
was received prior to payment and that the invoice was paid within the discount period.

Inv. No. Merchandise Freight Paid by Seller Freight Terms Returns and Allowances

FOB shipping point,

22392 $7,650 $120 $450
1/10, net 45

a. $7,694

b. $7,530

c. $7,128

d. $7,574

133. Details of invoices for purchases of merchandise are as follows:

Returns and
Invoice Merchandise Freight Freight Terms Allowances

Invoice A $2,800 $45 FOB shipping point, 1/10, n/30 $200

Invoice B 7,600 60 FOB destination, n/30 800

Invoice C 1,400 55 FOB shipping point, 2/10, n/30 600

Invoice D 500 50 FOB destination, 1/10, n/30 0

What will be the total amount collected on all four invoices, assuming that credit for returns and allowances was
received prior to payment and that all invoices were paid within the discount period.

a. $10,863

b. $10,803

c. $10,753

d. $10,653

134. Assume that the total inventory on hand at the end of the year as determined by taking a physical inventory is
$62,000. Of the $62,000, $8,000 has been sold FOB destination and is awaiting pickup by the carrier. What is the cost
of inventory reported on the balance sheet?
a. $54,000

b. $58,000

c. $70,000

d. $62,000

135. Assume that the total inventory on hand at the end of the year as determined by taking a physical inventory is
$63,000. Excluded from the count were purchases of $6,000 in transit under FOB shipping point terms. What is the
cost of inventory reported on the balance sheet?

a. $63,000

b. $57,000

c. $55,000

d. $69,000

136. Assume that the total inventory counted at the end of the year was $75,000. Excluded from the count were
purchases of $5,000 in transit under FOB destination terms. What is the cost of inventory reported on the balance
sheet?

a. $70,000

b. $75,000

c. $60,000

d. $80,000

137. which of the following groupings of accounts includes only accounts that carry a normal debit balance?

a. Sales Tax Payable, Inventory, Delivery Expense, and Customer Refunds Payable

b. Inventory, Delivery Expense, Cost of Goods Sold, and Estimated Returns Inventory

c. Delivery Expense, Customer Refunds Payable, Estimated Return Inventory, and Sales

d. Inventory, Cost of Goods Sold, Customer Refunds Payable, and Sales

138. Which of the following groupings of accounts includes only accounts that carry a normal credit balance?

a. Sales Tax Payable, Customer Refunds Payable, and Sale

b. Customer Refunds Payable, Estimated Returns Inventory, and Sales

c. Inventory, Delivery Expense, and Sales

d. Sales Tax Payable, Cost of Goods Sold, and Sales

139. The following entry was journalized in the books of Bright Company:

Date Account Debit Credit

Apr. 8 Accounts Payable-Marigold, Inc. 3,000

Inventory 3,000

Debit Memo No. 25.

What is the impact of this entry on the accounting equation?

a. a decrease in Assets and a decrease in Owner's Equity

b. a decrease in Assets and a decrease in Liabilities

c. an increase in Assets and an increase in Owner's Equity

d. an increase in Assets and an increase in Liabilities

140. The following entry was journalized in the books of Bright Company:

Date Account Debit Credit

Jan. 12 Inventory 8,000

Accounts Payable-HST, Inc. 8,000

Purchased inventory on account.

What is the impact of this entry on the accounting equation?

a. an increase in Assets and an increase in Liabilities

b. an increase in Assets and an increase in Owner's Equity

c. a decrease in Assets and a decrease in Owner's Equity

d. a decrease in Assets and a decrease in Liabilities

141. The following entry was journalized in the books of Brighty Company:

Date Account Debit Credit

Mar. 31 Cost of Goods Sold 18,000

Inventory 18,000

Recorded cost of goods sold.

What is the impact of this entry on the accounting equation?

a. an increase in Assets and an increase in Owner's Equity

b. a decrease in Assets and a decrease in Owner's Equity

c. an increase in Assets and an increase in Liabilities

d. a decrease in Assets and a decrease in Liabilities

142. he following entry was journalized in the books of Bright Company:

Date Account Debit Credit

Oct. 31 Accounts Receivable-Digitec 12,000

Sales 12,000

Invoice No. 7112.

What is the impact of this entry on the accounting equation?

a. an increase in Assets and an increase in Owner's Equity

b. a decrease in Assets and a decrease in Liabilities

c. a decrease in Assets and a decrease in Equity

d. an increase in Assets and an increase in Liabilities

143. The following entry was journalized in the books of Bright Company:

Date Account Debit Credit

Nov. 3 Customer Refunds Payable 120

Accounts Receivable-Tillet Co. 120

Granted customer an allowance.

What is the impact of this entry on the accounting equation?

a. a decrease in Assets and a decrease in Owner's Equity

b. a decrease in Assets and a decrease in Liabilities

c. an increase in Assets and an increase in Owner's Equity

d. an increase in Assets and an increase in Liabilities

144. Welborn Stores offers a coupon on its website for $5 off the customer’s next purchase of $30 or more. Welborn
also printed coupons at the bottom of its sales receipts for 10% off the customer’s next purchase of any amount. All
sales are subject to a 5% sales tax (assessed on the amount charged to the sales account). Journalize the following
transactions:

a. A customer purchases $45 of merchandise, submits the $5 coupon, and pays cash. The cost of the
merchandise sold is $20.

b. A customer purchases $100 of merchandise, submits the 10% coupon, and pays with a VISA credit card. The
cost of the merchandise sold is $45.

If an amount box does not require an entry, leave it blank.

Transaction Account Debit Credit

a. Accounts PayableAccounts
ReceivableCashSalesSales Tax
 Payable

Accounts PayableAccounts
ReceivableCashInventorySales

Accounts PayableAccounts
ReceivableCashInventorySales
Tax Payable

Accounts PayableCashCost of
blank Goods SoldInventorySales Tax
Payable

Accounts PayableCashCost of
Goods SoldInventorySales

Accounts PayableCashCost of
b. Goods SoldSalesSales Tax
Payable

Accounts PayableCost of
Goods SoldEstimated
Coupons
PayableInventorySales

Accounts PayableCashCost of
Goods SoldEstimated
Coupons PayableSales

Accounts PayableCashCost of
Goods SoldEstimated
Coupons PayableSales Tax
Payable

Accounts PayableCashCost of
blank Goods SoldInventorySales Tax
Payable

Accounts PayableCashCost of
Goods SoldInventorySales

145. A discount taken by the buyer for the early payment of an invoice is called a

a. trade discount

b. payment discount

c. purchases discount

d. sales discount
146. The account used by the seller for recording shipping costs paid by the seller (FOB destination) is

a. Sales

b. Inventory

c. Freight In

d. Delivery Expense

147. A discount given to government agencies and customers who purchase large quantities of merchandise is called
a

a. trade discount

b. purchases discount

c. sales discount

d. payment discount

148. Which of the following informs the seller of the reasons for the return of merchandise or the request for a price
allowance?

a. purchase invoice

b. credit memo

c. sales invoice

d. debit memo

149. If Estimated Coupons Payable has a credit balance at the end of the period and all unredeemed coupons have
expired, the balance is added back to Sales.

True

False

150. If a retail business distributes a coupon through a newspaper, no liability (journal entry) is recorded at the time
of issue.

True

False