Deck 8: Cash and Internal Controls

Question 1

Cash,not including cash equivalents,includes:

A)Postage stamps.
B)Customer checks,cashier checks,and money orders.
C)IOUs.
D)Two-year certificates of deposit.
E)Money market funds.

Answer 1

B

Question 2

The impact of technology on internal controls includes:

A)Reduced processing errors.
B)Elimination of the need for regular audits.
C)Elimination of the need to bond employees.
D)Elimination of separation of duties.
E)Elimination of fraud.

Answer 2

A

Question 3

The following information is available for Birch Company at December 31: Based on this information,Birch Company should report Cash and Cash Equivalents on December 31 of:

A)$29,420
B)$41,345
C)$31,345
D)$39,420
E)$38,770

Answer 3

A

Question 4

A company's internal control system:

A)Eliminates the company's risk of loss.
B)Monitors company and employee performance.
C)Eliminates human error.
D)Eliminates the need for audits.
E)Eliminates the need for managers' certification of controls.

Question 5

Internal control systems are:

A)Developed by the Securities and Exchange Commission for public companies.
B)Developed by the Small Business Administration for non-public companies.
C)Developed by the Internal Revenue Service for all U.S.companies.
D)Required by Sarbanes-Oxley (SOX)to be documented and certified if the company's stock is traded on an exchange.
E)Required only if a company plans to engage in interstate commerce.

Question 6

Basic bank services do not include:

A)Bank accounts.
B)Bank deposits.
C)Checking.
D)Electronic funds transfer.
E)Petty cash management.

Question 7

Which of the following is not one of the policies and procedures that make up an internal control system?

A)Protect assets.
B)Ensure reliable accounting.
C)Guarantee a return to investors.
D)Urge adherence to company policies.
E)Promote efficient operations.

Question 8

Managers place a high priority on internal control systems because the systems assist managers in all of the following except:

A)Promoting efficient operations.
B)Protecting assets.
C)Urging adherence to company policies.
D)Ensuring reliable accounting.
E)Assuring that no loss will occur.

Question 9

The principles of internal control include:

A)Separate recordkeeping from custody of assets.
B)Maintain minimal records.
C)Use only computerized systems.
D)Bond all employees.
E)Require automated sales systems.

Question 10

Principles of internal control include all of the following except:

A)Apply technological controls.
B)Maintaining security by having one person track and record assets.
C)Perform regular and independent reviews.
D)Separate recordkeeping from custody of assets.
E)Divide responsibilities for related transactions.

Question 11

Cash equivalents meet all of the following criteria except:

A)Are readily convertible to a known cash amount.
B)Include short-term investments purchased within 3 months of their maturity dates.
C)Have a market value that is not sensitive to interest rate changes.
D)Include short-term U.S.treasury bills.
E)Are more liquid than cash.

Question 12

A properly designed internal control system:

A)Lowers the company's risk of loss.
B)Insures profitable operations.
C)Eliminates the need for an audit.
D)Requires the use of non-computerized systems.
E)Is not necessary if the company uses a computerized system.

Question 13

Two clerks sharing the same cash register is a violation of which internal control principle?

A)Establish responsibilities.
B)Maintain adequate records.
C)Insure assets.
D)Bond key employees.
E)Apply technological controls.

Question 14

Internal control policies and procedures have limitations not including:

A)Human error.
B)Human fraud.
C)Cost-benefit principle.
D)Collusion.
E)Establishing responsibilities.

Question 15

The following information is available for Montrose Company at December 31: Based on this information,the amounts considered Cash and Cash Equivalents,respectively on December 31 are:

A)Cash $10,430;Cash equivalents $20,400
B)Cash $8,540;Cash equivalents $22,290
C)Cash $8,790;Cash equivalents $26,400
D)Cash $19,190;Cash equivalents $16,000
E)Cash $11,235;Cash equivalents $26,400

Question 16

Which internal control principle prescribes the use of pre-numbered printed checks?

A)Technological controls.
B)Maintain adequate records.
C)Perform regular and independent reviews.
D)Establish responsibilities.
E)Divide responsibility for related transactions.

Question 17

Cash equivalents:

A)Include savings accounts.
B)Include checking accounts.
C)Are readily converted to a known cash amount.
D)Include time deposits.
E)Have no immediate value.

Question 18

The three parties involved with a check are:

A)The writer,the cashier,and the bank.
B)The maker,the payee,and the bank.
C)The maker,the manager,and the payee.
D)The bookkeeper,the payee,and the bank.
E)The signer,the cashier,and the company.

Question 19

Cash equivalents:

A)Are short-term,highly liquid investment assets.
B)Include 6-month certificates of deposit.
C)Include checking accounts.
D)Are recorded in petty cash.
E)Include money orders.

Question 20

The following information is available for Fenton Manufacturing Company at June 30: Based on this information,Fenton Manufacturing Company should report Cash and Cash Equivalents on June 30 of:

A)$28,495
B)$29,286
C)$23,286
D)$12,095
E)$22,495

Question 21

The number of days' sales uncollected:

A)Is used to evaluate the liquidity of receivables.
B)Is calculated by dividing accounts receivable by sales.
C)Measures a company's ability to pay its bills on time.
D)Measures a company's debt to income.
E)Is calculated by dividing sales by accounts receivable.

Question 22

The days' sales uncollected ratio is used to:

A)Measure how many days of sales remain until the end of the year.
B)Determine the number of days that have passed without collecting on accounts receivable.
C)Identify the likelihood of collecting sales on account.
D)Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.
E)Measure the amount of cash sales during a period.

Question 23

A company had net sales of $21,500 and ending accounts receivable of $2,700 for the current period.Its days' sales uncollected equals:

A)8.0 days.
B)58.9 days.
C)45.8 days.
D)7.4 days.
E)45.2 days.

Question 24

The number of days' sales uncollected is calculated by:

A)Dividing accounts receivable by net sales.
B)Dividing accounts receivable by net sales and multiplying by 365.
C)Dividing net sales by accounts receivable.
D)Dividing net sales by accounts receivable and multiplying by 365.
E)Multiplying net sales by accounts receivable and dividing by 365.

Question 25

At the end of the day,the cash register's record shows $1,050,but the count of cash in the cash register is $1,055.The correct entry to record the cash sales is

A)Debit Cash $1,055;credit Sales $1,055.
B)Debit Cash $1,055;credit Cash Over and Short $5;credit Sales $1,050.
C)Debit Cash $1,050;credit Sales $1050.
D)Debit Cash $1,050;debit Cash Over and Short $5;credit Sales $1,055.
E)Debit Cash Over and Short $5,credit Sales $5.

Question 26

Freeman Co.had net sales of $4.2 million and ending accounts receivable of $0.8 million.Its days' sales uncollected equals:

A)5.3 days.
B)69.5 days.
C)19.2 days.
D)11.5 days.
E)292 days.

Question 27

A bank does not issue a debit memorandum to notify the depositor of which of the following?

A)All withdrawals through an ATM.
B)A fee assessed to the depositor's account.
C)An uncollectible check.
D)Periodic payments arranged in advance,by a depositor.
E)A deposit to their account.

Question 28

A remittance advice is a(n):

A)Explanation for a payment by check.
B)Bank statement.
C)Internal voucher.
D)Electronic funds transfer.
E)Cancelled check.

Question 29

A set of procedures and approvals for verifying,approving and recording obligations for eventual cash disbursement,and for issuing checks for payment only of verified,approved,and recorded obligations is referred to as a(n):

A)Internal cash system.
B)Petty cash system.
C)Cash disbursement system.
D)Voucher system.
E)Cash control system.

Question 30

All of the following are true of the number of days' sales uncollected ratio except:

A)Is most effective in evaluating the cash sales of a company.
B)Can be used for comparisons to other companies in the same industry.
C)Can be used for comparisons between current and prior periods.
D)Reflects the liquidity of receivables.
E)Measures how much time is likely to pass before the current amount of accounts receivable is received in cash.

Question 31

The following information is taken from Reagan Company's December 31 balance sheet: If net credit sales for the current year were $612,000,the firm's days' sales uncollected for the year is:

A)60 days
B)85 days
C)42 days
D)154 days
E)70 days

Question 32

At the end of the day,the cash register tape shows $1,020 in cash sales but the count of cash in the register is $1,035.The proper entry to account for this excess is:

A)Debit Cash $1,020;credit Sales $1,020.
B)Debit Cash $1,035;credit Sales $1,035.
C)Debit Cash $1,035;credit Sales $1,020;credit Cash Over and Short $15.
D)Debit Cash $1,020;debit Cash Over and Short for $15;credit Sales $1,035.
E)Debit Cash Over and Short $15;credit Cash $15.

Question 33

The Cash Over and Short account:

A)Is used when the cash account reports a credit balance.
B)Is used to record the income effects of errors in making change and/or processing petty cash transactions.
C)Is not necessary in a computerized accounting system.
D)Can never have a debit balance.
E)Can never have a credit balance.

Question 34

An income statement account that is used to record cash overages and cash shortages arising from petty cash transactions or from errors in making change is titled:

A)Cash Lost.
B)Bank Reconciliation.
C)Petty Cash.
D)Cash Over and Short.
E)Cash Receivable.

Question 35

A voucher is an internal document or file:

A)Prepared after an invoice is received.
B)Used as a substitute for an invoice if the supplier fails to send one.
C)Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded.
D)Takes the place of a bank check.
E)Prepared before the company orders goods to make sure that all goods are being ordered from an approved vendor list.

Question 36

A bank statement provided by the bank includes:

A)A list of outstanding checks.
B)A list of petty cash amounts.
C)The beginning and the ending balance of the depositor's account.
D)A listing of deposits in transit.
E)A reconciliation to the depositor cash account.

Question 37

Which of the following procedures would weaken control over cash receipts that arrive through the mail?

A)After the mail is opened,a list (in triplicate)of the money received is prepared with a record of the sender's name,the amount,and an explanation of why the money is sent.
B)The bank reconciliation is prepared by a person who does not handle cash or record cash receipts.
C)For safety,only one person should open the mail,and that person should immediately deposit the cash received in the bank.
D)The cashier deposits the money in the bank and the recordkeeper records the amounts received in the accounting records.
E)The employees handling the cash receipts are bonded.

Question 38

Preparing a bank reconciliation on a monthly basis is an example of:

A)Establishing responsibility.
B)Separation of duties.
C)Protecting assets by proving the accuracy of cash records.
D)A technological control.
E)Poor internal control.

Question 39

The voucher system of control:

A)Is a set of procedures and approvals designed to control cash receipts and the acceptance of obligations.
B)Establishes procedures for verifying,approving,and recording obligations for eventual cash disbursement.
C)Establishes procedures for receiving checks for the sale of verified,approved,and recorded activities.
D)Applies only when multiple purchases are made from the same supplier.
E)Is required in large companies but not beneficial for small to mid-sized companies.

Question 40

Internal control procedures for cash receipts do not require that:

A)Custody over cash is kept separate from its recordkeeping.
B)All collections for sales are be received immediately upon making the sales.
C)Clerks having access to cash in a cash register should not have access to the register tape or file.
D)An employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts reported by the cashier.
E)Cash sales should be recorded on a cash register at the time of each sale.

Question 41

When a petty cash fund is in use:

A)Expenses paid with petty cash are recorded when the fund is replenished.
B)Petty Cash is debited when funds are replenished.
C)Petty Cash is credited when funds are replenished.
D)Expenses are not recorded.
E)Cash is debited when funds are replenished.

Question 42

Childers Company has an established petty cash fund in the amount of $400.The fund was last reimbursed on November 30.At the end of December,the fund contained the following petty cash receipts: If,in addition to these receipts,the petty cash fund contains $201 of cash,the journal entry to reimburse the fund on December 31 will include:

A)A debit to Transportation-In of $73.
B)A debit to Petty Cash of $189.
C)A credit to Office Supplies of $66.
D)A credit to Cash Over and Short of $10.
E)A credit to Cash of $199.

Question 43

When reimbursing the petty cash fund:

A)Cash is debited.
B)Petty Cash is credited.
C)Petty Cash is debited.
D)Appropriate expense accounts are debited.
E)No expenses are recorded.

Question 44

The entry to record reimbursement of the petty cash fund for postage expense should include:

A)A debit to Postage Expense.
B)A debit to Petty Cash.
C)A debit to Cash.
D)A debit to Cash Short and Over.
E)A debit to Supplies.

Question 45

Ferguson Co.has a $200 petty cash fund.At the end of the first month the accumulated receipts represent $43 for delivery expenses,$127 for merchandise inventory,and $12 for miscellaneous expenses.The fund has a balance of $18.The journal entry to record the reimbursement of the account includes a:

A)Debit to Petty Cash for $200.
B)Debit to Cash Over and Short for $18.
C)Credit to Cash for $182.
D)Credit to Inventory for $127.
E)Credit to Cash Over and Short for $18.

Question 46

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794,how should this error be treated on the bank reconciliation?

A)Subtract $45 from the bank's balance.
B)Add $45 to the bank's balance.
C)Subtract $45 from the book balance.
D)Add $45 to the book balance.
E)Subtract $45 from the bank's balance and add $45 to the book's balancE.$749 - $794 = $45 too much deducted from the company's cash account balance that must be added back to cash.

Question 47

Ferguson Co.decides to establish a petty cash fund with a beginning balance of $200.The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system.The journal entry to record establishing the account is:

A)Debit Cash $200 and credit Petty Cash $200.
B)Debit Cash $200 and credit Cash Over and Short $200.
C)Debit Petty Cash $200 and credit Cash $200.
D)Debit Petty Cash $200;credit Cash $175;and credit Cash Over and Short $25.
E)Debit Cash $200 and credit Petty Cash Over and Short $200.

Question 48

If a check that was outstanding on last period's bank reconciliation was not among the cancelled checks returned by the bank this period,in preparing this period's reconciliation,the amount of this check should be:

A)Added to the book balance of cash.
B)Deducted from the book balance of cash.
C)Added to the bank balance of cash.
D)Deducted from the bank balance of cash.
E)Ignored in preparing the period's bank reconciliation.

Question 49

An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n):

A)Internal audit.
B)Bank reconciliation.
C)Bank audit.
D)Trial reconciliation.
E)Analysis of debits and credits.

Question 50

Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency plus $382.50 in receipts at the end of the month.The entry to replenish the petty cash fund will include:

A)A debit to Cash for $377.50.
B)A debit to Cash Over and Short for $5.00.
C)A debit to Petty Cash for $382.50.
D)A credit to Cash for $382.50.
E)A debit to Cash for $387.50.

Question 51

On a bank reconciliation,an unrecorded debit memorandum for printing checks is:

A)Noted as a memorandum only.
B)Added to the book balance of cash.
C)Deducted from the book balance of cash.
D)Added to the bank balance of cash.
E)Deducted from the bank balance of cash.

Question 52

The entry to establish a petty cash fund includes:

A)A debit to Cash and a credit to Petty Cash.
B)A debit to Cash and a credit to Cash Over and Short.
C)A debit to Petty Cash and a credit to Cash.
D)A debit to Petty Cash and a credit to Accounts Receivable.
E)A debit to Cash and a credit to Petty Cash Over and Short.

Question 53

A company had $43 missing from petty cash that was not accounted for by petty cash receipts.The correct procedure is to:

A)Debit Cash Over and Short for $43.
B)Credit Cash Over and Short for $43.
C)Debit Petty Cash for $43.
D)Credit Petty Cash for $43.
E)Credit Cash for $43.

Question 54

A key factor in a voucher system includes all of the following except:

A)Only approved departments and individuals are authorized to incur an obligation that will result in the payment of cash.
B)Procedures for purchasing,receiving and paying for merchandise are divided among several departments.
C)The system limits the individuals that can incur cash payment obligations for a company.
D)It is applied to purchases of merchandise inventory and all other expenses.
E)It is not necessary if the supplier provides both receiving report and invoice with the merchandise shipped.

Question 55

If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30,in preparing the September 30 bank reconciliation,the company should:

A)Deduct the deposit from the bank statement balance.
B)Send the bank a debit memorandum.
C)Deduct the deposit from the September 30 book balance and add it to the October 1 book balance.
D)Add the deposit to the book balance of cash.
E)Add the deposit to the bank statement balance.

Question 56

If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227,how should this error be treated on the bank reconciliation?

A)Subtract $45 from the bank's balance.
B)Add $45 to the bank's balance.
C)Subtract $45 from the book balance.
D)Add $45 to the book balance.
E)Subtract $45 from the bank's balance and add $45 to the book's balancE.$272 - $227 = $45 not enough deducted from the company's cash account balance that must be subtracted from cash.

Question 57

On a bank reconciliation,the amount of an unrecorded bank service charge should be:

A)Added to the book balance of cash.
B)Deducted from the book balance of cash.
C)Added to the bank balance of cash.
D)Deducted from the bank balance of cash.
E)Noted in memorandum form only.

Question 58

Assume that the custodian of a $450 petty cash fund has $64.50 in coins and currency plus $382.50 in receipts at the end of the month.The entry to replenish the petty cash fund will include:

A)A debit to Cash for $379.50.
B)A credit to Cash Over and Short for $3.00.
C)A debit to Petty Cash for $382.50.
D)A credit to Cash for $385.50.
E)A debit to Cash for $385.50.

Question 59

Outstanding checks refer to checks that have been:

A)Written,recorded,sent to payees,and received and paid by the bank.
B)Written and not yet recorded in the company books.
C)Held as blank checks.
D)Written,recorded on the company books,sent to the payee,but not yet paid by the bank.
E)Issued by the bank.

Question 60

A company wants to decrease its $200 petty cash fund to $175.The entry to reduce the fund is:

A)Debit Cash Over and Short for $25;credit Petty Cash $25.
B)Debit to Cash $25;credit Petty Cash $25.
C)Debit Miscellaneous Expenses $25;credit Cash $25.
D)Debit Petty Cash for $175;debit Cash Over and Short $25;credit Cash $200.
E)Debit Petty Cash $25;credit Cash $25.

Question 61

The internal document prepared to notify the appropriate persons that goods ordered have been received,describing the quantities and condition of the goods is the

A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Question 62

In the process of reconciling its bank statement for January,Maxi's Clothing's accountant compiles the following information: The adjusted cash balance per the books on January 31 is:

A)$5,855
B)$5,335
C)$4,055
D)$4,815
E)$4,585

Question 63

In the process of reconciling its bank statement for April,Donahue Enterprises' accountant compiles the following information: The adjusted cash balance per the books on April 30 is:

A)$6,900
B)$8,160
C)$4,600
D)$6,520
E)$5,840

Question 64

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

A)Sales discounts.
B)Trade discounts.
C)Purchases discounts.
D)Discounts lost.
E)Discounts earned.

Question 65

A seller (or provider)of goods or services to a business organization,usually a manufacturer or wholesaler,is known as a:

A)Vendor.
B)Payee.
C)Vendee.
D)Creditor.
E)Debtor.

Question 66

A company using the net method of recording purchases failed to take advantage of a discount available.When they pay the full (gross)amount of an invoice at the end of the credit period the journal entry will include a debit to:

A)Merchandise Inventory.
B)Sales Discounts.
C)Discounts Lost.
D)Cash.
E)Accounts Receivable.

Question 67

The internal document prepared by a department manager that informs the purchasing department of its merchandise needs and requests that the merchandise be purchased is the

A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Question 68

During the month of July,Clanton Industries issued a check in the amount of $845 to a supplier on account.The check did not clear the bank during July.In preparing the July 31 bank reconciliation,the company should:

A)Deduct the check amount from the book balance of cash.
B)Add the check amount to the book balance of cash.
C)Deduct the check amount from the bank balance.
D)Add the check amount to the bank balance.
E)Make a journal entry in the company records for an error.

Question 69

A voucher system is a set of procedures and approvals:

A)Designed to eliminate the need for subsidiary ledgers.
B)Designed to determine if the company is operating profitably.
C)Used almost exclusively by small companies.
D)Used to ensure that the company sells on credit only to creditworthy customers.
E)Designed to control cash disbursements and the acceptance of obligations.

Question 70

A company that uses the net method of recording purchases made a purchase of $400 with terms of 2/10,n/30.The entry to record the purchase would be:

A)Debit Merchandise Inventory $392;credit Accounts Payable $392.
B)Debit Merchandise Inventory $400;credit Discounts Lost $8;credit Accounts Payable $392.
C)Debit Merchandise Inventory $392;credit Cash for $392.
D)Debit Merchandise Inventory $392;debit Discounts Lost $8;credit Accounts Payable $400.
E)Debit Accounts Payable $400;credit Discounts Lost $8;credit Cash $392.

Question 71

Which of the following events would cause a bank to debit a depositor's account?

A)The depositor orders new checks through the bank at a cost of $50.
B)The bank collects a note receivable and related interest on the depositor's behalf.
C)There are outstanding checks drawn on the account at month-end.
D)There are deposits in transit on the account at month-end.
E)The bank corrects an error from previous month by adding $75 to the depositor account.

Question 72

All of the following are considered effective cash management principles except:

A)Encouraging collection of receivables by offering discounts for early payments.
B)Keeping only necessary levels of assets.
C)Planning expenditures.
D)Retaining excess cash for unexpected expenditures.
E)Delaying payment of liabilities until the last possible day.

Question 73

A company records purchases using the net method.On February 1,they purchased merchandise inventory on account for $7,300 with terms of 1/10,n/30.The February 1 journal entry to record this transaction would include a:

A)Debit to Merchandise Inventory of $7,300.
B)Debit to Merchandise Inventory of $7,227.
C)Debit to Merchandise Inventory of $73.
D)Credit to Merchandise Inventory of $73.
E)Credit to Accounts Payable of $7,300.

Question 74

The gross method of recording purchases refers to recording:

A)Purchases at the invoice price less any cash discounts.
B)Specified amounts and timing of payments that a buyer agrees to in return for being granted credit.
C)Purchases at the full invoice price,without deducting any cash discounts.
D)Inventory at its selling price.
E)Inventory at the lower of cost or market.

Question 75

The checklist of steps necessary for approving an invoice for recording and payment,also known as the check authorization,is the

A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Question 76

The itemized statement of goods prepared by a vendor listing the customer's name,items sold,sales prices,and terms of the sale is called the

A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Question 77

The document that the purchasing department prepares and sends to the vendor to place an order is called the

A)Purchase requisition.
B)Purchase order.
C)Invoice.
D)Receiving report.
E)Invoice approval.

Question 78

Internal controls are crucial to companies that convert from U.S.GAAP to IFRS because of all of the following risks except:

A)Possible misstatement of financial information.
B)Possible fraud.
C)Controls are significantly different across the globe.
D)Ineffective communication of the change to investors,creditors,and others.
E)Management's inability to certify the effectiveness of the controls.

Question 79

Merchandise with an invoice price of $2,000 was purchased on February 3,terms 2/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on February 27 is:

A)Debit Accounts Payable $1,960;credit Cash $1,960.
B)Debit Accounts Payable $2,000;credit Cash $2,000.
C)Debit Accounts Payable $1,960;debit Discounts Lost $40;credit Cash $2,000.
D)Debit Accounts Payable $2,000;credit Merchandise Inventory $40;credit Cash $1,960.
E)Debit Accounts Payable $2,000;credit Discounts Lost $40;credit Cash $1,960.

Question 80

Merchandise with an invoice price of $2,000 was purchased on February 3,terms 2/15,n/60.The company uses the net method to record purchases.The entry to record the cash payment of this purchase obligation on February 17 is:

A)Debit Accounts Payable $1,960;credit Cash $1,960.
B)Debit Accounts Payable $2,000;credit Cash $2,000.
C)Debit Accounts Payable $1,960;debit Discounts Lost $40;credit Cash $2,000.
D)Debit Accounts Payable $2,000;credit Merchandise Inventory $40;credit Cash $1,960.
E)Debit Accounts Payable $2,000;credit Discounts Lost $40;credit Cash $1,960.