Question : 96.A company purchased $1,800 of merchandise July 5 with terms : 1258796

 

 

96.A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 8, it paid the full amount due. The amount of the cash paid on July 8 equals:   

A.$200.

 

B.$1,564.

 

C.$1,568.

 

D.$1,600.

 

E.$1,800.

Cash Paid = ($1,800 – $200) * .98 = $1,568

 

 

 

97.A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The amount of the cash paid on July 28 equals:   

A.$200.

 

B.$1,564.

 

C.$1,568.

 

D.$1,600.

 

E.$1,800.

Cash Paid = ($1,800 – $200) = $1,600No discount may be taken because the payment was not within 10 days of the purchase.

 

 

 

98.A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The correct journal entry to record the purchase on July 5 is:   

A.Debit Merchandise Inventory $1,600; credit Cash $1,600.

 

B.Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800.

 

C.Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600.

 

D.Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800.

 

E.Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

 

 

 

 

99.A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The correct journal entry to record the merchandise return on July 7 is:   

A.Debit Merchandise Inventory $1,600; credit Cash $1,600.

 

B.Debit Merchandise Inventory $200; credit Accounts Payable $200.

 

C.Debit Merchandise Inventory $200; credit Sales Returns $200.

 

D.Debit Accounts Payable $200; credit Merchandise Inventory $200.

 

E.Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.

 

 

 

 

100.A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. The correct journal entry to record the payment on July 28 is:    

A.Debit Merchandise Inventory $1,600; credit Cash $1,600.

 

B.Debit Cash $1,600; credit Accounts Payable $1,600.

 

C.Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.

 

D.Debit Accounts Payable $1,800; credit Cash $1,800.

 

E.Debit Accounts Payable $1,600; credit Cash $1,600.

 

 

 

 

101.A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:   

A.$3,725.00.

 

B.$3,925.00.

 

C.$3,995.00.

 

D.$4,000.50.

 

E.$4,075.00.

Cash Paid = [($4,000 – $275) * .98] + $350 = $4,000.50No discount may be taken on the transportation costs.

 

 

 

102.A buyer failed to take advantage of the vendor’s credit terms of 2/15, n/45, but instead paid the invoice in full at the end of 60 days. By not taking advantage of the cash discount, the equivalent annual interest lost on the amount of the purchase is:   

A.12.2%

 

B.16.2%

 

C.18.9%

 

D.24.3%

 

E.24.5%

Interest Rate = [365/(45 – 15)] * .02 = 24.3%

 

 

 

103.Sales returns:   

A.Refer to merchandise that customers return to the seller after the sale.

 

B.Refer to reductions in the selling price of merchandise sold to customers.

 

C.Represent cash discounts.

 

D.Represent trade discounts.

 

E.Are not recorded under the perpetual inventory system until the end of each accounting period.

 

 

 

 

104.All of the following statements regarding sales returns and allowances are true except:   

A.A reduction is the selling price because of damaged merchandise is included in sales returns and allowances.

 

B.There is no relationship between sales returns and allowances and the possibility of lost future sales.

 

C.Sales returns and allowances are recorded in a separate contra-revenue account.

 

D.Sales returns and allowances are rarely disclosed in published financial statements.

 

E.Sales returns and allowances are closed to the Income Summary account.

 

 

 

 

105.A debit to Sales Returns and Allowances and a credit to Accounts Receivable:   

A.Reflects an increase in amount due from a customer.

 

B.Recognizes that a customer returned merchandise and/or received an allowance.

 

C.Requires a debit memorandum to recognize the customer’s return.

 

D.Is recorded when a customer takes a discount.

 

E.Reflects a decrease in amount due to a supplier.