2. Merchandise is:
A) the same as inventory.
B) an asset.
C) the same as gross sales.
D) both the same as inventory and an asset are correct.
3. Gross sales equals:
A) net sales minus sales discount.
B) sales discount less net income.
C) the total of cash sales and credit sales.
D) net income plus gross profit.
4. A contra-revenue account with a debit balance for returned goods is called:
A) Sales Returns and Allowances.
B) Sales Discount.
C) the credit period.
D) the discount period.
5. The time frame when customers are allowed to pay their bills and still be eligible for a discount is the:
A) credit period.
B) discount period.
C) closing period.
D) due date.
6. The length of time the customer is allowed to repay the bill is the:
A) discount period.
B) closing period.
C) credit period.
D) due date.
7. R&R Lumber reports gross sales of $80,000. If sales returns and allowances are $12,000 and sales discounts are $3,700, what are the net sales?
A) $95,700
B) $68,000
C) $64,300
D) $76,300
8. Kristi’s pottery sold 250 tiles at $25.00 each to a charge customer, terms 1/10, n/30. Which entry is required to record this transaction?
A) Debit Cash for $6,250; credit Tile Sales for $6,250
B) Debit Accounts Receivable for $6,187.50; credit Tile Sales for $6,187.50
C) Debit Accounts Receivable for $6,187.50; debit Sales Discount for $62.50, and credit Tile Sales for $6,250
D) Debit Accounts Receivable for $6,250; credit Tile Sales for $6,250
9. Lisa’s Blankets and Bedding had a sale of $375 to a charge customer, terms 1/15, n/30. Lisa should record this transaction as follows:
A) debit Accounts Receivable $375; credit Sales $375.
B) debit Cash $375; credit Sales $375.
C) debit Accounts Receivable $371.25; debit Sales Discounts $3.75; credit Sales $375.
D) debit Sales $375; credit Accounts Receivable $375.
10. Unlimited Materials sold goods for $1,850 plus 6% sales tax to a charge customer, terms n/30. Which entry is required to record this transaction?
A) Debit Accounts Receivable for $1,961; credit Sales Tax Payable $111 and credit Sales for $1,850
B) Debit Cash for $1,850; credit Sales for $1,850
C) Debit Accounts Receivable for $1,850; credit Sales for $1,850
D) Debit Accounts Receivable $1,961; credit Sales, $1,961
11. Secret Trails received payment in full within the credit period for boarding for $800 plus 6% sales tax. Terms of the sale were 2/10, n/30. Which entry is required to record this transaction?
A) Debit Accounts Receivable, $800; credit Sales, $800
B) Debit Cash, $848; credit Accounts Receivable, $848
C) Debit Cash, $848; credit Sales, $848
D) Debit Cash, $800; credit Sales , $800
12. Urban Camping sold goods for $250 to a charge customer. The customer returned for credit $80 worth of goods. Which entry is required to record the return transaction?
A) Debit Sales Returns and Allowances $80; credit Accounts Receivable for $80
B) Debit Sales Returns and Allowances for $80; credit Sales for $80
C) Debit Sales $250; credit Sales Returns and Allowances $250
D) Debit Accounts Receivable $170; credit Sales Returns and Allowances for $170
13. Monica’s Closet received payment in full for goods sold within the discount period on a $480 sales invoice, terms 2/10, n/30. Which entry records this transaction?
A) Debit Accounts Receivable; credit Sales for $480
B) Debit Cash; credit Accounts Receivable for $480
C) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Sales for $480
D) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Accounts Receivable for $480
14. Medeco sold goods for $75 to a charge customer. The customer returned for credit $25 worth of goods. Terms of the sale were 1/10, n/30. If the customer pays the amount owed within the discount period, what is the amount the customer should pay?
A) $49.50
B) $69.25
C) $75.00
D) $50.00
15. Zach returned $195 of merchandise to Secret Trails. His original purchase was $400, with terms 1/10, n/30. If Justin pays the balance of his account after the discount period, how much should he pay?
A) $202.95
B) $205.00
C) $195.00
D) $400.00
16. The arrangements between buyer and seller as to when payments for merchandise are to be made are called:
A) credit terms.
B) net cash.
C) cash on demand.
D) gross cash.
17. The document indicating to the customer that the seller is reducing the amount owed by the customer is:
A) credit memorandum.
B) sales discount.
C) sales returns and allowances.
D) schedule of accounts receivable.
18. The total of all cash sales and credit sales equals:
A) net sales.
B) gross sales.
C) sales discount.
D) sales returns and allowances.
19. Sales discounts are not taken on which of the following?
A) Sales Tax
B) Freight
C) Merchandise returned
D) Sales Discounts are not taken on any of these.
20. Sue’s Jewelry sold 25 necklaces for $25 each to a credit customer. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the sale would include:
A) a debit to Accounts Receivable for $662.50.
B) a debit to Accounts Receivable for $625.
C) a debit to Sales for $662.50.
D) a debit to Sales for $625.
21. Logan’s Art Studio was moving and sold furniture that was no longer needed for cash. The entry would include:
A) a credit to Sales.
B) a debit to Sales.
C) a credit to Furniture.
D) a debit to Furniture.
22. Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.
A) True
B) False
23. Sales is a revenue account.
A) True
B) False
24. If a credit memorandum is issued, what account will be increased on the seller’s books?
A) Accounts Receivable
B) Accounts Payable
C) Sales Discount
D) Sales Returns and Allowances
25. If a credit memorandum is issued, what account will be decreased on the seller’s books?
A) Accounts Receivable
B) Accounts Payable
C) Sales Discount
D) Sales Returns and Allowances
26. Sue’s Jewelry sold 25 necklaces for $25 each to a credit customer. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the return would include:
A) a debit to Sales Returns and Allowances for $132.50.
B) a debit to Sales Returns and Allowances for $125.00.
C) a credit to Sales Tax Payable for $17.50.
D) a debit to Accounts Receivable for $132.50.
27. The credit period is longer than the discount period.
A) True
B) False
28. Collected a payment from a credit customer: This will be recorded with:
A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Capital.
D) None of these are correct.
29. Sold merchandise subject to a sales tax, accepting cash. This will be recorded with:
A) a credit to an asset account.
B) a credit to a liability account.
C) a debit to Capital.
D) None of these are correct.
30. Sue’s Jewelry sold 25 necklaces for $25 each to a credit customer. The invoice included a 6% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the payment would include:
A) a credit to Cash for $519.40.
B) a credit to Cash for $530.00.
C) a credit to Accounts Receivable for $519.40.
D) a credit to Accounts Receivable for $530.00.
31. A record showing the activity and the balances owed by each customer is called the:
A) general ledger.
B) sales journal.
C) cash receipts journal.
D) accounts receivable subsidiary ledger.
32. When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the:
A) master account.
B) subsidiary account.
C) receivable account.
D) controlling account.
33. The principal ledger containing all the balance sheet and income statement accounts is the:
A) general ledger.
B) creditors’ ledger.
C) customers’ ledger.
D) subsidiary ledger.
34. Entries to customers’ accounts for sales are posted in the:
A) accounts receivable subsidiary ledger.
B) accounts payable subsidiary ledger.
C) fixed asset subsidiary ledger.
D) cash subsidiary ledger.
35. A characteristic of a schedule of accounts receivable is that:
A) it contains a list of customers’ names with balances.
B) the total is equal to the accounts receivable control account at the end of the month.
C) it is prepared at the end of the month.
D) All of these answers are correct.
36. Which of the following statements about subsidiary ledgers is most accurate?
A) The subsidiary ledger accounts will never equal the control account in the general ledger.
B) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for Accounts Receivable.
C) The subsidiary ledger accounts will equal the amount in the Sales account.
D) All of these answers are correct.
37. The balance in the Accounts Receivable account is $2,100 debit. Therefore, the balances in the subsidiary ledger should be $2,100.
A) True
B) False
38. A characteristic of Sales Returns and Allowances is that:
A) it has a debit balance.
B) it tracks returns from customers.
C) it is a contra-revenue account.
D) All of these answers are correct.
39. Credit terms of 2/10, n/30 mean that:
A) a 2% discount is allowed if the bill is paid between 10 and 30 days.
B) a 2% discount is allowed if the bill is paid within 30 days.
C) a 2% discount is allowed if the bill is paid after 10 days.
D) a 2% discount is allowed if the customer pays the bill within 10 days, or the entire amount is due within 30 days.
40. The liability account used to record sales tax owed is:
A) Sales Tax Expense.
B) Prepaid Taxes.
C) Sales Tax Payable.
D) Sales.
