Deck 9: Sales and Cash Receipts

Question 1

The Bixby Co.had the following transactions involving the purchase of merchandise.Prepare the necessary general journal entries.Any applicable freight costs are prepaid by the seller.The perpetual inventory method is in use.

Merchants who buy goods from wholesalers for resale to customers are:

A)merchandisers.
B)retailers.
C)service companies.
D)None of the above is correct.

Answer 1

B

Question 2

Santa Materials sold goods for $2,000 plus 2% sales tax to a charge customer,terms n/30.Which entry is required to record this transaction?

A)Debit Accounts Receivable $2,040;credit Sales Tax Payable $140;credit Sales $2,000
B)Debit Cash $2,000;credit Sales $2,000
C)Debit Accounts Receivable $2,000;credit Sales $2,000
D)Debit Accounts Receivable $2,040;credit Sales $2,040

Answer 2

A

Question 3

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.

Answer 3

A

Question 4

The side that increases the balance of the Sales Discount account is:

A)a credit.
B)a debit.
C)zero.
D)It does not have a normal balance.

Question 5

The normal balance of the Sales Returns and Allowances account is:

A)a credit.
B)a debit.
C)zero.
D)It does not have a normal balance.

Question 6

Betsy's pottery sold 200 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 $5,000;credit Tile Sales $5,000
B)Debit Accounts Payable $4,050;credit Tile Sales $4,050
C)Debit Accounts Receivable $4,050;debit Sales Discount $50.00;credit Tile Sales $5,000
D)Debit Accounts Receivable $5,000;credit Tile Sales $5,000

Question 7

The length of time the customer is allowed to repay the bill is the:

A)discount period.
B)short period.
C)credit period.
D)due date.

Question 8

Maria's Blankets and Bedding had a sale of $450 to a charge customer,terms 1/15,n/30.Maria should record this transaction as follows:

A)debit Accounts Receivable $450;credit Sales $450.
B)debit Cash $450;credit Sales $450.
C)debit Accounts Receivable $346.50;debit Sales Discounts $4.50;credit Sales $450.
D)debit Sales $450;credit Accounts Receivable $450.

Question 9

Home Restoration reports net sales of $60,000.If sales returns and allowances are $10,000 and sales discounts are $1,500,what are gross sales?

A)$60,000
B)$71,500
C)$68,500
D)$38,500

Question 10

B&B Lumber reports gross sales of $80,000.If sales returns and allowances are $20,000 and sales discounts are $3,000,what are the net sales?

A)$83,000
B)$63,000
C)$57,000
D)$70,000

Question 11

A characteristic of the account,Sales Discount,includes the following except for:

A)debit balance.
B)contra-revenue account.
C)records the cash discounts granted to customers.
D)contra-asset.

Question 12

The liability account used to record sales tax owed is:

A)Sales Tax Expense.
B)Prepaid Taxes.
C)Sales Tax Payable.
D)Sales.

Question 13

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)supplies minus inventory.

Question 14

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)short period.
D)due date.

Question 15

Sales Tax Payable is a:

A)liability account with a debit balance.
B)liability account with a credit balance.
C)contra-asset account with a debit balance.
D)contra-asset account with a credit balance.

Question 16

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.

Question 17

Credit terms of 2/10,n/30 mean that:

A)a 2% discount is allowed if the bill is paid within 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 entry amount is due within 30 days.

Question 18

Net sales equal:

A)gross sales.
B)gross sales - sales returns and allowances.
C)gross sales - sales returns and allowances - sales discounts.
D)gross sales - gross profit.

Question 19

The Bixby Co.had the following transactions involving the purchase of merchandise.Prepare the necessary general journal entries.Any applicable freight costs are prepaid by the seller.The perpetual inventory method is in use.

Merchandise is:

A)the same as inventory.
B)an asset.
C)the same as supplies.
D)Both A and B are correct.

Question 20

Reduction given to company customers for early payment is a:

A)sales returns and allowance.
B)purchase discount.
C)sales discount.
D)customer discount.

Question 21

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)discount period.

Question 22

Mike returned $200 of merchandise to Secret Trails.His original purchase was Mike 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)$204.00
B)$196.00
C)$200.00
D)$400.00

Question 23

If management wanted to determine if customers were returning goods at a higher rate than usual,it could use the Sales Returns and Allowances account to analyze the information.

Question 24

Net Sales equals Gross Sales - Sales Returns and Allowances - Accounts Receivable.

Question 25

Customer returned merchandise for credit.This will be recorded with:

A)a debit to an asset account.
B)a debit to a revenue account.
C)a credit to an asset account.
D)None of these is correct.

Question 26

A wholesale customer returned merchandise having already paid for it within the cash discount period.The return 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 is correct.

Question 27

The contra-revenue accounts include:

A)Sales Tax Payable.
B)Sales Returns and Allowances.
C)Sales Discount.
D)Both B and C are correct.

Question 28

Max'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 credit to Cash.

Question 29

Sue's Jewelry sold 20 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 original sale would include:

A)a debit to Accounts Receivable for $530.
B)a debit to Accounts Receivable for $500.
C)a debit to Sales for $530.
D)a debit to Sales for $500.

Question 30

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)debit memorandum.

Question 31

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 the above.

Question 32

Sold merchandise on account would be recorded with:

A)a debit to an asset account.
B)a debit to a liability account.
C)a debit to Capital.
D)None of these is correct.

Question 33

Monica's Closet received payment in full within the discount period for goods sold on a $600 sales invoice,terms 2/10,n/30.Which entry records this payment?

A)Debit Accounts Receivable $600;credit Sales $600
B)Debit Cash $600;credit Accounts Receivable $600
C)Debit Cash $588,debit Sales Discount $12;credit Sales $600
D)Debit Cash $588,debit Sales Discount $12;credit Accounts Receivable $600

Question 34

The total of all cash sales and credit sales equals:

A)net sales.
B)gross sales.
C)accounts receivable.
D)sales returns and allowances.

Question 35

Urban Camping sold goods for $200 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 $80
B)Debit Sales Returns and Allowances $80;credit Sales $80
C)Debit Sales $80;credit Sales Returns and Allowances $80
D)Debit Accounts Receivable $80;credit Sales Returns and Allowances $80

Question 36

A sales discount correctly taken by the charge customer was debited to Sales at the time the entry was recorded.This error will cause:

A)the net income for the period to be overstated.
B)the net income for the period to be understated.
C)the sales discount account to be understated.
D)the sales account to be overstated.

Question 37

Merchandise sold on credit was returned for credit and recorded with a debit to Sales Returns and Allowances and a credit to Accounts Payable.This error will cause:

A)the net income for the period to be overstated.
B)the net income for the period to be understated.
C)the assets to be overstated.
D)the accounts payable to be understated.

Question 38

Secret Trails received payment in full within the credit period for horse boarding for $900 plus 6% sales tax.Terms of the sale were 2/10,n/30.Which entry is required to record this?

A)Debit Cash,$900;credit Sales,$900
B)Debit Cash,$936;debit Sales Discount $18;credit Accounts Receivable,$954
C)Debit Cash,$954;credit Sales,$954
D)Debit Cash,$936;credit Sales,$936

Question 39

John sold goods for $100 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)$74.25
B)$75.00
C)$100.00
D)$90.00

Question 40

The normal balance of Sales Tax Payable is a credit.

Question 41

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 42

Explain why the account Sales Tax Payable is credited when a sale is made subject to a sales tax?

Question 43

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 44

When a customer returns defective office supplies the Sales Returns and Allowances account will be debited.

Question 45

Use the following information to answer the questions below:

The Net Sales are ________.

Question 46

Sales Tax Payable represents an asset on the books of the seller.

Question 47

Determine the amount of net sales given:
gross sales = $200,000
sales discounts = $25,000
sales returns and allowances = $35,000
$ ________

Question 48

Sales Returns and Allowances is a contra-sales account.

Question 49

The Sales Returns and Allowances account is contra-revenue.

Question 50

Sales Discounts is an asset account.

Question 51

If cash flow is so important to merchandisers,why do they extend credit to their customers?

Question 52

If a customer returns merchandise,the income for that period will be increased.

Question 53

Sales tax collected by the seller is not included in the seller's total revenue.

Question 54

Sales Discounts and Sales Returns and Allowances are contra-asset accounts.

Question 55

The time a customer is granted to pay the bill is the discount period.

Question 56

Compare and discuss a discount period versus a credit period.

Question 57

Terms of 3/10,n/30 means that a customer is allowed a 3% discount if he or she pays within 10 days of the invoice date.

Question 58

Sales is a revenue account.

Question 59

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 60

Calculate gross sales:
net sales = $100,000
sales returns and allowances = $25,000
sales discounts = $30,000
accounts receivable = $12,000

Question 61

A record showing the activity and the balances owed by each customer is called the:

A)accounts payable journal.
B)sales journal.
C)cash receipts journal.
D)accounts receivable subsidiary ledger.

Question 62

A checkmark in the PR column in the general journal means:

A)the entry was recorded correctly.
B)the amount was posted to the controlling account.
C)the amount was recorded in the subsidiary ledger.
D)the customer paid in the discount period.

Question 63

Every controlling account must have its own:

A)junior ledger.
B)general ledger.
C)subsidiary ledger.
D)general journal.

Question 64

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 of cash sales.
D)All of these answers are correct.

Question 65

If a credit memorandum is issued,what account will be decreased on the seller's books?

A)Accounts Receivable
B)Accounts Payable
C)Sales
D)Sales Returns and Allowances

Question 66

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.

Question 67

The normal balance of the accounts receivable subsidiary ledger is:

A)credit.
B)debit.
C)It does not have a normal balance.
D)Not enough information provided.

Question 68

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 69

Accounts of a single type are kept in the:

A)supplemental ledger.
B)junior ledger.
C)subsidiary ledger.
D)None of these answers is correct.

Question 70

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 71

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 72

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.

Question 73

Recording to the accounts receivable subsidiary ledger is done:

A)daily.
B)monthly.
C)weekly.
D)annually.

Question 74

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 75

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 76

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

Question 77

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 78

The accounts receivable subsidiary ledger:

A)is organized in alphabetical order.
B)is not kept in the same book as Accounts Receivable.
C)should equal the controlling account in the general ledger.
D)All of the above are correct.

Question 79

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)sales subsidiary ledger.

Question 80

The return of merchandise by a credit customer was recorded with a debit to Accounts Payable and a credit to Accounts Receivable and the subsidiary ledger.This error will cause:

A)the net income for the period to be overstated.
B)the net income for the period to be understated.
C)the control account to not agree with the subsidiary ledger.
D)the assets to be overstated.