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In May, a retailer recorded credit sales of $10,000. Assuming the sales tax rate is 7 percent, the entry to record the sales in the sales journal would include:
 
a debit to Accounts Receivable of $10,700...
a credit to sales of $19,760
a credit to accounts receivable of $19760
a debit to Sales tax payable of $760
   
Which of the following statements is correct?
 
The sales journal is used for recording both cash sales and credit sales.
Since the sales journal is used for a single purpose, there is no need to enter any descriptions
To provide an adequate audit trail, sales on credit should be recorded in both the sales journal and the general journal.
The complete information for each sale of merchandise on credit can be recorded on one line of the general journal.
   
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes
 
a debit to Sales Returns and Allowances and a credit to Accounts Receivable.
   
Ables Budget Boutique uses special journals. If a credit customer returns $40 of goods on which $3 of sales tax was charged, identify the
statement below that would be correct when posting the transaction.
 
A debit of $43 would be posted to the customer's account in the accounts receivable ledger.
   
ABC Skiing Essentials uses special journals. If a credit customer returns $8,000 of goods on which $560 of sales tax was charged, select
the correct entry to record the return:
 
Sales returns and allowances....................$8,000
Sales tax payable............................$560
Accounts receivable...............$8,560
   
The Sales Returns and Allowances account is presented
 
on the income statement as a deduction from Sales.
   
After all postings have been made, the total of the schedule of accounts receivable should equal
 
the balance of the Accounts Receivable account in the general ledger.
   
A retailer recorded the following in June: cash sales $2,000; credit sales, $9,000; sales returns and allowances, $1,000. Assuming the sales
tax rate is 7 percent, the entry to record the sales tax payment includes a debit to Sales Tax Payable for
 
$700
   
Which of the following describes Sales Tax Payable?
 
A liability account with a normal credit balance.
   
On the Income Statement, Sales Returns and Allowances have the effect of
 
decreasing total revenue.
   
Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax. The entry in the sales journal will include a debit to
Accounts Receivable for
$2,250.00.
   
Which of the following describes Sales Returns and Allowances?
 
A contra revenue account with a normal debit balance.
   
Kay Sadia sold merchandise for $8,750 subject to a 6% sales tax. The entry in the sales journal will include a debit to
Accounts Receivable for
 
$9,275.00.
   
Which of the following statements is not correct?
 
A credit purchase of equipment for use in the business would be recorded in the purchases journal.
   
After a supplier of merchandise is selected, the purchasing department issues a form called
 
a purchase order.
   
Freight charges on merchandise purchases should be debited to
 
the Freight In account.
   
Purchases of merchandise on credit should be recorded in
 
the purchases journal.
   
Credit purchases of supplies that are to be used in the business are entered in
 
the general journal.
   
In a firm that uses special journals, the purchase of merchandise with terms of 2/10, n/30 is recorded in the
 
purchases journal.
   
In a firm that uses special journals, the purchase of merchandise for $2,800, payable in 30 days,
plus a freight charge of $140 is recorded in the
 
purchases journal.
   
In a firm that uses special journals, the sale of merchandise for cash is recorded in the
 
cash receipts journal.
   
In a firm that uses special journals, an allowance given for damaged merchandise is recorded in the
 
general journal.
   
A firm that sells goods that it purchases for re-sale is a
 
merchandising business
   
In a firm that uses special journals, the purchase of merchandise for cash is recorded in the
 
cash payments journal.
   
In May, a retailer recorded credit sales of $10,000. Assuming the sales tax rate is 7 percent, the entry to record the sales in the sales journal would include:
 
a debit to Accounts Receivable of $10,700.
   
Which of the following statements is correct?
 
Since the sales journal is used for a single purpose, there is no need to enter any descriptions.
   
Which of the following statements is not correct?
 
Postings to the accounts receivable subsidiary ledger are usually made once a month on the last day of the month.
A credit purchase of equipment for use in the business would be recorded in the purchases journal.
   
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes
 
a debit to Sales Returns and Allowances and a credit to Accounts Receivable.
   
Ables Budget Boutique uses special journals. If a credit customer returns $40 of goods on which $3 of sales tax was charged, identify
the statement below that would be correct when posting the transaction.
 
A debit of $43 would be posted to the customer's account in the accounts receivable ledger. X
   
ABC Skiing Essentials uses special journals. If a credit customer returns $8,000 of goods on which $560 of sales tax was charged,
select the correct entry to record the return:
 
Sales returns and allowances....................$8,000
Sales tax payable............................$560
Accounts receivable...............$8,560
   
Check marks next to the individual amounts in the purchases journal mean that the amounts
 
have been posted to the accounts payable subsidiary ledger.
   
A creditor's account in the accounts payable ledger has a $1,600 beginning balance. After a transaction for $700 is posted from the
purchases journal, the balance of the creditor's account is
 
$2,300 credit.
   
To record a return of merchandise purchased on credit on the books of the buyer, the accountant would
 
debit Accounts Payable and credit Purchases Returns and Allowances.
   
The Sales account is classified as a(n)
 
revenue account.
   
In a firm that uses special journals, a sale of merchandise on credit is recorded in the
 
sales journal.
   
Music, Inc. uses a periodic inventory system when recording its purchases and sales of inventory.
If the business returns $1,000 of damaged goods to its supplier, select the correct entry to record the return:
 
Accounts payable.............$1000
Purchase returns and allowances ..........$1000
   
Which of the following statements is correct?
 
Another name that may be used for the Freight In account is "Transportation In."
   
A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month.
Its net delivered cost of purchases was
 
$15,400.
   
Best Value Furniture uses the periodic inventory system to account for its inventory.
It purchased $2,000 of goods from its supplier but later returned $400 of the goods due to damage. Best Value would record the return by:
 
Debiting Accounts Payable, crediting Purchases
Purchase Returns and Allowances
   
A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1. After a transaction of $12,800 is posted from the purchases
journal and a transaction of $9,200 is posted from the cash payments journal, the balance of the creditor's account on April 30 is:
 
$14,160 credit
   
The Sales Returns and Allowances account is presented
 
on the income statement as a deduction from Sales.
   
Bally Boutique uses a perpetual inventory system when recording its purchases and sales of inventory. The business sells $6,000 of goods to
charge account customers and the goods originally cost Bally, $3000. The entry to record the sale would include:
 
a debit to Cost of Goods Sold for $3,000 and a credit to Merchandise Inventory for $3,000
   
Which of the following statements is not correct?
 
A credit purchase of equipment for use in the business would include a debit to Merchandise Inventory.
   
Which of the following statements is correct?
 
To the customer, a supplier's invoice is a purchase invoice.
   
After a supplier of merchandise is selected, the purchasing department issues a form called
 
purchase order
   
After all postings have been made, the total of the schedule of accounts receivable should equal
 
the balance of the Accounts Receivable account in the general ledger.
   
A wholesale firm made sales with a list price of $1,500 and trade discounts of 25 and 15 percent. Calculate the amount the firm will use to record the sale in the sales journal.
 
Invoice price will be equal to $600
   
A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1. After a transaction of $12,800 is posted from the
purchases journal and a transaction of $9,200 is posted from the cash payments journal, the balance of the creditor's account on April 30 is:
 
$14,160 credit
   
Which of the following accounts has a normal debit balance?
 
Purchases
   
Bally Boutique uses a perpetual inventory system when recording its purchases and sales of inventory. The business sells $6,000 of goods to charge
 
account customers and the goods originally cost Bally, $3000. The entry to record the sale would include:
a debit to Cost of Goods Sold for $3,000 and a credit to Merchandise Inventory for $3,000
   
The entry to record a purchase of merchandise on credit includes
 
a debit to Purchases and a credit to Accounts Payable
   
Freight charges on merchandise purchases should be debited to
 
the Freight In account
   
The Purchases account is
 
a temporary account
   
A retailer recorded the following in June: cash sales $2,000; credit sales, $9,000; sales returns and allowances, $1,000.
Assuming the sales tax rate is 7 percent, the entry to record the sales tax payment includes a debit to Sales Tax Payable for
 
$700
   
Purchases of merchandise on credit should be recorded in
 
the general journal
   
The source document for recording a purchase of merchandise on credit is
 
the purchase invoice
   
Credit purchases of supplies that are to be used in the business are entered in
 
both the general and subsidiary ledgers
   
When the sales department needs goods, it sends the purchasing department a form called
 
a purchase requisition
   
Which of the following describes Sales Tax Payable?
 
A liability account with a normal credit balance.
   
On the Income Statement, Sales Returns and Allowances have the effect of
 
decreasing total revenue.
   
Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax.
The entry in the sales journal will include a debit to Accounts Receivable for
 
$2,250.00.
   
Which of the following describes Sales Returns and Allowances?
 
A contra revenue account with a normal debit balance.
   
Kay Sadia sold merchandise for $8,750 subject to a 6% sales tax. The entry in the sales journal will include a debit to Accounts Receivable for
 
$9,275.00.
  Which of the following statements is not correct?
 
A credit purchase of equipment for use in the business would be recorded in the purchases journal.
   
After a supplier of merchandise is selected, the purchasing department issues a form called
 
a purchase order.
   
Freight charges on merchandise purchases should be debited to
 
the Freight In account.
   
Purchases of merchandise on credit should be recorded in
 
the purchases journal.
   
Credit purchases of supplies that are to be used in the business are entered in
 
the general journal.
   
In a firm that uses special journals, the purchase of merchandise with terms of 2/10, n/30 is recorded in the
 
purchases journal.
   
Which of the following statements is correct?
 
Another name that may be used for the Freight In account is "Transportation In."
   
A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was
 
$15,400.
   
Best Value Furniture uses the periodic inventory system to account for its inventory. It purchased $2,000 of goods from its supplier but later
returned $400 of the goods due to damage. Best Value would record the return by:
 
debiting Accounts Payable, crediting Purchases Purchase Returns and Allowances
   
In a firm that uses special journals, the purchase of merchandise for $2,800, payable in 30 days, plus a freight charge of $140 is recorded in the
 
purchases journal.
   
In a firm that uses special journals, the purchase of merchandise for cash is recorded in the
 
cash payments journal.
   
Check marks next to the individual amounts in the purchases journal mean that the amounts
 
have been posted to the accounts payable subsidiary ledger.
   
A creditor's account in the accounts payable ledger has a $1,600 beginning balance. After a transaction for $700 is posted from the purchases journal, the balance of the creditor's account is
 
$2,300 credit.
   
To record a return of merchandise purchased on credit on the books of the buyer, the accountant would
debit Accounts Payable and credit Purchases Returns and Allowances.
   
Music, Inc. uses a periodic inventory system when recording its purchases and sales of inventory. If the business returns $1,000 of damaged goods to its supplier, select the correct entry to record the return:
 
Accounts payable.............$1000
Purchase returns and allowances ..........$1000
   
Major documents used in the purchasing process are the purchase requisition, purchase order, receiving report, and sales invoice.
False
 
Special discounts on list prices granted to different classes of customers are known as trade discounts.
True
 
Special discounts on list prices granted to different classes of customers are known as trade discounts.
True
 
Merchandise inventory at the beginning of the period minus purchases plus merchandise inventory at the end of the period equals cost of goods sold for the period.
False

Freight-In is an adjunct-purchases account to which transportation charges on merchandise purchases are debited.
True
 
The posting of purchase transactions to the general ledger is done in the same manner as sales transactions
True
 
When the merchandise is received, a receiving report indicating what has been received is prepared.
True
 
A company's internal control process should ensure that the person buying and receiving goods is different from the person making payment
True
 
Gross profit is a measure of the amount of sales dollars available to cover expenses after covering the cost of the goods sold.
True
 
After the posting of the accounts payable ledger and the general ledger is completed, the total of the accounts payable ledger balances should equal the Accounts Payable balance in the general ledger.
True
 
Purchases Returns and Allowances is a contra-purchases account.
True
 
Discounts from quoted prices which are contingent on prompt payment of invoices, within a stated discount period, are called cash discounts.
True
 
If the terms specified on an invoice are 2/10, n/30, this means that a discount of 2% will be allowed if payment is made within 30 days from the date of the invoice.
False
 
If purchases are recorded at the net amount, assuming that all available cash discounts will be taken, the net-price method of recording the purchase has been used.
True
 
The purchases discounts lost account is only used with the gross-price method of recording purchases.
False
 
If the terms of an invoice dated April 10 are 3/10, n/30, the invoice must be paid on or before April 20 in order to be entitled to a discount.
True
 
An invoice is never subject to both trade and cash discounts.
False
 
Purchases Discounts is a contra-purchases account used to record cash discounts allowed on purchases.
True
 
An account number in the Posting Reference column of the general journal indicates that the account has been posted to the general ledger
True
 
A schedule of accounts payable is prepared from the list of accounts in the accounts receivable ledger.
False
 
In entering in the books an invoice that involves a trade discount, the amount to be used is the net amount after the trade discount is subtracted.
True
 
Postings to the accounts payable ledger should be made at the end of the month.
False
 
A schedule of accounts payable is used to prove that the sum of the accounts payable ledger balances equals the Accounts Payable balance in the general ledger.
True
 
Purchases Returns and Allowances is the contra-purchases account to which purchases returns and purchases allowances are credited.
True
 
The purchases discounts account is debited for cash discounts to customers.
False
 
FOB destination means free on board at the destination of the shipment.
True
 
FOB shipping point means free on board at destination of the shipment.
False
 
If the merchandise received is damaged or unsatisfactory, an adjustment may be made that is referred to as an allowance.
True
 
For merchandising businesses, the term "purchases" refers only to merchandise acquired for resale.
True
 
A trade discount is often offered by wholesalers.
True
 
The first document created in the purchasing process normally is the purchase requisition.
True
 
The first step in the purchasing process involves preparing a purchase order.
False
 
A form used to request the purchasing department to purchase merchandise or other property is known as a purchase order.
False
 
Trade discounts represent a reduction in the price of the merchandise and should not be entered in the accounts of either the seller or the buyer.
True
 
A written order by a buyer for merchandise or other property specified in a purchase requisition is known as a purchase invoice.
False
 
A source document prepared by the seller that lists the items shipped, their cost, and the method of shipment is commonly referred to by the seller as a purchase invoice.
False