Question 1

Merchandise inventory available at the beginning of the period plus cost of goods purchased minus merchandise inventory at the end of the period equals

Accepted Answer

This equation is used to calculate the cost of goods sold, which is the total cost incurred for the merchandise that was sold during the period. Therefore, the answer is B, cost of goods sold.

Question 2

A list showing the amount due to each supplier as of a specified date is known as the

Accepted Answer

A schedule of accounts payable is a list showing the amount due to each supplier as of a specified date, whereas a schedule of accounts receivable shows the amount owed to the business by its customers. A trial balance is a list of all the accounts in the general ledger with their balances, used to ensure that the total debits equal the total credits. A balance sheet is a financial statement that shows the financial position of a business at a specific point in time, including its assets, liabilities, and equity. Therefore, the correct answer is D, schedule of accounts payable.

Question 3

The terms on an invoice are 4/15, n/30. This means that

Accepted Answer

The terms 4/15, n/30 mean that a discount of 4% will be allowed if payment is made within 15 days from the date of the invoice. The "n/30" portion means that the total amount on the invoice is due within 30 days, but no discount will be given after the initial 15 day period.

Question 4

Which of the following indicates that a shipment is free on board at the destination of the shipment and the seller will pay the transportation costs?

Accepted Answer

FOB destination indicates that the shipment is free on board at the destination of the shipment, and the seller will pay the transportation costs. COD indicates that the recipient must pay for the shipment upon delivery. FOB shipping point indicates that the buyer takes responsibility for the shipment once it leaves the seller's facility. 4/10, EOM is a payment term indicating a 4% discount if paid within 10 days of the end of the month.

Question 5

A record used to keep the amount owed to each supplier is called a(n)

Accepted Answer

An accounts payable ledger is a record used to keep track of the amount owed to each supplier. An accounts receivable ledger, on the other hand, is used to record the amount owed by customers who have not yet paid for goods or services provided. A transportation ledger and a general ledger for accounts payable are not specific records for tracking supplier balances.

Question 6

An invoice in the amount of $916 is subject to a trade discount of 10% and credit terms of 3/10, n/30. The amount of the trade discount would be

Accepted Answer

To find the trade discount, we first need to find the list price or the amount before discount. Let x be the list price.
According to the question,
List price = $916
Trade discount = 10% = 0.1
Therefore, x - 0.1x = 916 (Applying trade discount formula)
0.9x = 916
x = 916/0.9
x = $1017.78
Now, we can find the trade discount amount by subtracting the list price from the amount after discount.
Trade discount = List price - Amount after discount
Trade discount = $1017.78 - $91.60
Trade discount = $91.18
Hence, the trade discount amount is $91.60.

Question 7

After the posting of the accounts payable ledger is completed, the total of the accounts payable ledger balances should equal the balance of which of the following general ledger accounts?

Accepted Answer

The total of the accounts payable ledger balances should equal the balance of the Accounts Payable general ledger account. This is because the accounts payable ledger tracks individual amounts owed to each supplier, while the Accounts Payable general ledger account represents the total amount owed to all suppliers.

Question 8

An invoice of $237.50 dated April 2 is subject to credit terms of 2/10, n/30. The amount to be paid if the invoice is paid on or before April 12 is

Accepted Answer

To calculate the amount to be paid if the invoice is paid on or before April 12, we need to apply the discount offered for early payment. In this case, the terms are 2/10, n/30. This means that the buyer can take a 2% discount if the invoice is paid within 10 days (on or before April 12) or pay the full amount within 30 days (by May 2).

To determine the amount to be paid if the invoice is paid on or before April 12, we need to subtract the discount from the total amount due:

Discount = 2% of $237.50 = $4.75
Amount to be paid if paid within discount period = $237.50 - $4.75 = $232.75

Therefore, the correct answer is C, $232.75.

Question 9

The account to which transportation charges on incoming merchandise are generally entered is

Accepted Answer

Transportation charges on incoming merchandise are entered into the Freight-In account, which is an expense account used to record the cost of shipping and transporting goods purchased for resale. This account is typically included in the cost of the inventory and is reported on the balance sheet as a current asset.

Question 10

An invoice in the amount of $916 is subject to a trade discount of 10% and credit terms on 3/10, n/30. If the invoice is not paid within the discount period, the amount that would be paid to satisfy the invoice would be

Accepted Answer

The correct answer is A because the trade discount of 10% reduces the invoice amount to $916 - (0.10 * $916) = $824.40. Since the invoice is not paid within the discount period, the full amount of $824.40 would be paid to satisfy the invoice.

Question 11

The cost of merchandise purchased during the period less any discounts granted by suppliers and amounts returned to suppliers and amounts of any allowances made by suppliers is called

Accepted Answer

Net purchases is the cost of merchandise purchased during the period less any discounts granted by suppliers and amounts returned to suppliers and amounts of any allowances made by suppliers.

Question 12

Assume the gross amount of an invoice is $100 and a discount of 20% is allowed. The net amount is

Accepted Answer

To calculate the net amount, we need to subtract the discount from the gross amount.

Discount = 20% of $100 = $20

Net amount = Gross amount - Discount = $100 - $20 = $80

Therefore, the correct answer is B.

Question 13

An invoice of $237.50 dated April 2 is subject to credit terms of 2/10, n/30. If the invoice is paid on April 14, the amount to be paid would be

Accepted Answer

The payment is made on April 14, which is beyond the 10-day discount period (April 12). Therefore, the full invoice amount of $237.50 is due.

Question 14

Which of the following credit terms allows a discount of 2% if payment is made within 10 days with the total amount of the invoice due within 60 days?

Accepted Answer

The term "2/10, n/60" means a 2% discount is available if payment is made within 10 days, and the net (total) amount is due within 60 days.

Question 15

A discount offered as an inducement for prompt payment of an invoice is called a(n)

Accepted Answer

A discount offered for prompt payment of an invoice is called a cash discount. Trade discount is offered to customers buying in bulk. Invoice discount is a reduction in the amount to be paid on an invoice if it is paid before the due date. Early discount is not a commonly used term for this type of discount.

Question 16

(Appendix) When the net-price method of recording purchases is used, the debit to Purchases is for the

Accepted Answer

The net-price method of recording purchases involves deducting any available cash discounts from the invoice amount before recording the transaction. Therefore, the debit to Purchases is for the amount of the invoice less available cash discounts.

Question 17

A form used to request the responsible person or department to purchase merchandise or other property is known as a

Accepted Answer

A purchase requisition is a document used to request a purchase, typically completed by an employee or department that needs to procure items or services. It includes information on the requested item or service, quantity, estimated cost, and department to be charged. The purchasing department then uses the information in the purchase requisition to create a purchase order, which is a legal contract between the buyer and the seller.

Question 18

Which of the following indicates that the shipment is free on board at the final point of shipment and the seller must pay all transportation costs?

Accepted Answer

FOB destination indicates that the seller is responsible for transportation costs until the goods are delivered to the buyer at the final destination.

Question 19

Which of the following credit terms allows a discount of 3% if payment is made within 15 days from the date of the invoice; otherwise, the total amount of the invoice must be paid within 30 days from its date?

Accepted Answer

Option C specifies the credit terms that offer a discount of 3% if payment is made within 15 days, and if not, the total amount of the invoice must be paid within 30 days of its date. This is denoted as 3/15, n/30. The letter "n" in n/30 means "net," which signifies that the full payment is due within 30 days. Option A is incorrect as it lists EOM or "end of month" but does not provide a discount offered. Option B is incorrect as it lists EOM, which means the entire amount must be paid by the end of the month following the invoice date, and the terms suggest a discount, which is not offered. Option D is incorrect as it lists 15/3, which is an invalid credit term.

Question 20

The entry to record the purchase on account of merchandise for resale under the periodic inventory system includes

Accepted Answer

Under the periodic inventory system, purchases of merchandise for resale are recorded by debiting the Purchases account and crediting Accounts Payable when bought on account.

Quiz 11: Accounting for Purchases and Cash Payments