Question 1

Determine the amount of credit to be earned on a full return of merchandise purchased with an invoice price of $4,000 plus HST at 13% and credit terms of 2/10, n/30.

Accepted Answer

The answer of Determine the amount of credit to be...

Question 2

A debit memorandum decreases which account on the buyer's books?

Accepted Answer

A debit memorandum is a document sent by a seller to inform a buyer of a reduction in the amount owed for goods or services purchased. The reduction is typically due to an error in pricing, a return or adjustment of merchandise, or a discount. Therefore, the debit memorandum decreases the amount owed by the buyer and decreases the Accounts Payable account on the buyer's books.

Question 3

What type of account is HST Payable?

Accepted Answer

HST Payable is a liability account as it represents the amount of HST (Harmonized Sales Tax) collected from customers but not yet remitted to the government. It is considered a liability until the business remits the collected HST to the government.

Question 4

The credit that a company receives for the GST/HST it pays is called

Accepted Answer

The credit that a company receives for the GST/HST it pays is called Input Tax Credit. This credit can be claimed against the GST/HST that the company collects from its customers.

Question 5

The normal balance for Inventory is

Accepted Answer

Inventory is recorded as an asset on the balance sheet and its value increases with a debit entry, so the normal balance for inventory is a debit.

Question 6

When a debit memorandum for returned merchandise for Moore Co. is recorded, the entry is

Accepted Answer

When a debit memorandum for returned merchandise is recorded, the entry is to debit Accounts Payable Moore Co. in the accounts payable subsidiary ledger, debit Accounts Payable in the general ledger, and credit Purchases Returns and Allowances.

Question 7

The basic concept of the quick method of accounting for GST/HST is best described as follows:

Accepted Answer

The quick method is a simplified way for small businesses to calculate and remit their GST/HST. It allows for a reduction in the amount of GST/HST that must be charged and remitted to the government. The amount of tax saved varies based on the province or territory where the business is located, but generally ranges from 1% to 4%. However, the quick method is only available to businesses with total sales of less than $400,000 annually (in most provinces) and cannot be used by certain types of businesses such as those that provide exempt supplies. While the quick method may result in paying slightly more or less GST/HST than if detailed records were maintained, it can still be a beneficial option for qualifying businesses to simplify their accounting processes. A smaller company with large capital purchases may still benefit from using the quick method depending on their individual circumstances.

Question 8

An entry for a purchase return will include

Accepted Answer

A purchase return is a transaction in which a buyer returns goods to the seller. The entry to record a purchase return includes a credit to Inventory to reduce the inventory balance and a debit to Accounts Payable to reduce the amount owed to the seller.

Question 9

J. Frumm Co. has the following transaction totals for the month. Use this information to answer the questions below.
Cost of Freight-In        $150
Discounts received on purchases        750
Value of Inventory Returns and Allowances        900
Purchases of Inventory       7,000
HST Paid        1,620
Beginning Inventory        1,200
Cost of Goods Sold        1,350
Based on the above, Ending Inventory is ________.

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The answer of J. Frumm Co. has the following transaction...

Question 10

If Rosie sends back damaged merchandise for credit, to Rosie it would be a

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Question 11

Heidi's Accessories bought 40 necklaces for $10 each on account. The invoice included 5% GST 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

Accepted Answer

DThe entry to record the return of the necklaces would include a debit to Accounts Payable for $52.50, reflecting the return of 5 necklaces at $10 each, including the 5% GST (5 necklaces * $10 * 105% = $52.50). Additionally, there should be a debit to Inventory for $52.50 to reflect the reduction in inventory value due to the return, including the GST paid on the returned items.

Question 12

Purchases discounts are usually not taken on PST or HST.

Accepted Answer

Purchases discounts are based on the purchase price of goods, and PST or HST are taxes added on top of the purchase price. Therefore, discounts are not applied to taxes.

Question 13

Lee's Golf Shop on May 31 has the following transaction totals: 
Sales         $11,000
HST Collected        1,600
Sales Returns and Allowances        1,000
Opening Inventory        8,000
HST Paid        1,090
Cost of Freight In        500
Purchases during the period        1,000
Purchases discounts received        600
Cost of Goods Sold        2,500
Based on the above, ending Inventory for the period is

Accepted Answer

Ending Inventory is calculated as Opening Inventory + Purchases - Purchases Discounts + Freight In - Cost of Goods Sold = $8,000 + $1,000 - $600 + $500 - $2,500 = $6,400.

Question 14

What type of account is Prepaid HST?

Accepted Answer

The answer of What type of account is Prepaid HST?
...

Question 15

Trade discounts are not subject to HST.

Accepted Answer

Trade discounts are considered a reduction in the price of the goods or services being sold, and therefore are not subject to HST in Canada.

Question 16

Bruce's Jewelry bought 50 rings for $10 each on account. The invoice included 13% HST and payment terms of 2/10, n/30. In addition, five rings were later returned prior to payment. The entry to record the purchase would include

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Question 17

Following is the Schedule of Accounts Payable for London Warehouse. Considering GST of 5% is charged on each invoice, what is a breakdown of Inventory and GST Paid for each creditor?
Schedule of Accounts Payable
$$\begin{array} { l r } 
\text { J. Bentley } & \$ 1,575.00 \
\text { P. Anders } & 2,429.70 \
\text { N. Cassels } & \underline { 5,008.50 } \
\text { Total } & \$ 9,013.20
\end{array}$$

Accepted Answer

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Question 18

Fiona's Bistro on May 31 has the following transaction totals for the month:
 Sales        $78,000
HST Collected        2,410
Sales Returns and Allowances        1,500
Accounts Payable        9,400
Purchases made during the period        42,000
HST Paid        875
Inventory Returns and Allowances        2,200
Discounts received on purchases         1,850
Cost of Goods Sold        5,000
Net change in Inventory for the period is

Accepted Answer

To calculate the net change in inventory, we use the formula: 
Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory 
We are given all the values except for the beginning inventory and the ending inventory. However, we can calculate the cost of goods available for sale by adding the purchases to the beginning inventory: 
Beginning Inventory + Purchases = Cost of Goods Available for Sale 
Therefore, Beginning Inventory + Purchases - Cost of Goods Sold = Ending Inventory
Substituting the given values, we get: 
Beginning Inventory + $42,000 - $5,000 = Ending Inventory 
Beginning Inventory = $5,000 - $42,000 = -$37,000 
Since the beginning inventory cannot be negative, we assume that there was an error and that the beginning inventory should have been $37,000. Therefore, 
$37,000 + $42,000 - $5,000 = Ending Inventory 
Ending Inventory = $74,000 
The net change in inventory is then: 
Ending Inventory - Beginning Inventory = $74,000 - $37,000 = $37,000 
Therefore, the answer is B) $32,950, since this is the only option that is close to $37,000.

Question 19

On March 30, Francine's Bakery purchased $1,000, plus 13% HST, of merchandise on account from Smithers Company. The goods were shipped F.O.B. shipping point. The freight charge of $80 (includes HST) was paid by Williams Company and added to the invoice. The amount to record in the Inventory account is

Accepted Answer

The initial merchandise cost is $1,000 plus 13% HST, which is $1,130. However, the freight charge of $80 (including HST) should be added to the cost of goods purchased, making the total cost $1,080. This is the amount that should be recorded in the Inventory account.

Question 20

Determine the amount to be paid within the discount period for purchase with an invoice price of $3,000 plus GST at 5% and credit terms of 2/10, n/30 when $500 (before GST) has already been returned for credit.

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Quiz 11: Special Journals With Taxes