Question 1

Using a perpetual inventory system, the entry to record the purchase of merchandise on account involves a:
A)debit to Inventory.
B)debit to Accounts Payable.
C)credit to Inventory.
D)credit to Cash.

Accepted Answer

Under a perpetual inventory system, the purchase of merchandise on account is recorded by debiting Inventory to increase the asset account and crediting Accounts Payable to increase the liability, reflecting the obligation to pay for the merchandise in the future.

Question 2

Credit terms of 1/10 n/30 indicates that the buyer is:
A)allowed a 10% discount if payment is made within 30 days.
B)allowed a 1% discount if payment is made within 10 days.
C)allowed a 1% discount if payment is made within 30 days.
D)allowed a 30% discount if payment is made within 10 days.

Accepted Answer

Credit terms of 1/10 n/30 mean that the buyer can take a 1% discount on the invoice amount if the payment is made within 10 days; otherwise, the net (full) amount is due within 30 days.

Question 3

If the shipping terms are FOB shipping point and the freight bill is $200, the purchaser, using a perpetual inventory system would record payment of the freight with a debit to:
A)Inventory and credit to Cash for $200.
B)Accounts Payable and credit to Inventory for $200.
C)Inventory and credit to Purchases Discounts for $200.
D)Purchases Discounts and credit to Inventory for $200.

Accepted Answer

Under FOB shipping point terms, the buyer takes ownership of the goods once they are shipped, and is responsible for the freight charges. Therefore, the purchaser would record the freight cost as an addition to inventory cost, debiting Inventory and crediting Cash.

Question 4

When a discount is taken for prompt payment under a perpetual inventory system, the purchaser would credit:
A)Accounts Payable.
B)Accounts Receivable.
C)Purchases Discounts.
D)Inventory.

Accepted Answer

The answer of When a discount is taken for prompt...

Question 5

When the buyer pays the freight costs, the entry to record the payment under a perpetual inventory system would include a debit to:
A)Delivery Expense.
B)Purchases Discounts.
C)Inventory.
D)Freight In.

Accepted Answer

When the buyer pays the freight costs, it is typically added to the cost of the inventory under a perpetual inventory system, hence the debit to Inventory. This reflects the principle that inventory costs include all costs necessary to bring the inventory to its current location and condition.

Question 6

Day Company purchased $3,000 of merchandise on credit, terms 3/15 n/30. The entry to record payment for the merchandise within the discount period under a perpetual inventory system would include a:
A)debit to Inventory of $1,940.
B)debit to Accounts Payable of $1,940.
C)credit to Purchase Discounts of $90.
D)credit to Inventory of $90.

Accepted Answer

Under a perpetual inventory system, when a payment is made within the discount period, the inventory account is directly credited to reflect the discount received. The terms 3/15, n/30 mean that a 3% discount is available if payment is made within 15 days. Therefore, the discount amount is $3,000 x 3% = $90. The credit to Inventory reduces the cost of the inventory by the amount of the discount received.

Question 7

A company makes a purchase of $2,000 of inventory, subject to credit terms of 3/10 n/45 and returns $500 of inventory prior to payment. What is the amount of the payment assuming payment is made within the discount period?
A)$1,500
B)$1,455
C)$1,440
D)$1,560

Accepted Answer

The company initially purchased $2,000 of inventory. After returning $500, the total amount becomes $1,500. With a 3% discount for early payment (3/10 n/45 terms), the payment amount is $1,500 - ($1,500 * 0.03) = $1,500 - $45 = $1,455.

Question 8

Which of the following credit terms allows for a cash discount?
A)n/30
B)n/eom
C)n/60
D)1/10 n/30

Accepted Answer

D) 1/10 n/30 includes a cash discount term, indicating that a 1% discount is available if payment is made within 10 days; otherwise, the net (full) amount is due in 30 days.

Question 9

Mars Company purchased $2,500 of merchandise on account, terms 3/10 n/60. If payment was made within the discount period, the entry to record the payment under a perpetual inventory system would include a credit to:
A)Cash of $2,425.
B)Inventory of $2,352.
C)Accounts Payable of $2,400.
D)Cash for $2,400.

Accepted Answer

Under a perpetual inventory system, when payment is made within the discount period, the company can take advantage of the purchase discount. The terms 3/10 n/60 mean that the company can take a 3% discount if payment is made within 10 days. The discount amount is $2,500 x 3% = $75. Therefore, the payment amount after the discount is $2,500 - $75 = $2,425. The entry to record the payment would include a credit to Cash for the amount paid, which is $2,425.

Question 10

The seller is responsible for the shipping costs when the shipping terms are:
A)FOB destination.
B)COD destination.
C)FOB shipping point.
D)COD shipping point.

Accepted Answer

Under FOB (Free On Board) destination terms, the seller bears the shipping costs and retains ownership of the goods until they are delivered to the buyer's specified location.

Question 11

When the seller accepts a return of goods from the purchaser originally sold on account, the seller's journal entry would include a debit to:
A)Sales Discounts and credit to Cash.
B)Sales Returns and Allowances and credit to Accounts Receivable.
C)Sales Returns and Allowances and credit to Sales Discounts.
D)Sales Revenue and credit to Cash.

Accepted Answer

When a seller accepts a return of goods that were originally sold on account, the seller needs to reverse the revenue recognized from the sale. This is done by debiting Sales Returns and Allowances (which reduces the total sales revenue recognized) and crediting Accounts Receivable (which reduces the amount owed by the customer).

Question 12

The buyer is responsible for the shipping costs when the shipping terms are:
A)FOB destination.
B)COD destination.
C)FOB shipping point.
D)COD shipping point.

Accepted Answer

Under FOB shipping point, the buyer is responsible for the shipping costs as ownership transfers to the buyer once the goods leave the seller's premises.

Question 13

The entry to record the sale of merchandise for cash includes a:
A)debit to Accounts Receivable.
B)credit to Sales Discounts.
C)debit to Sales Revenue.
D)credit to Sales Revenue.

Accepted Answer

A sale of merchandise for cash would be recorded by debiting Cash and crediting Sales Revenue, reflecting the increase in cash and the revenue earned from the sale.

Question 14

A merchandiser purchases inventory on account under a perpetual inventory system with terms of 2/10 n/30. The merchandiser would:
A)credit Inventory on date of payment if the discount is taken.
B)credit Inventory on date of payment if the discount is not taken.
C)credit Purchases Discounts on date of purchase if the discount is taken.
D)debit Purchases Discounts on date of purchase if the discount is not taken.

Accepted Answer

Under a perpetual inventory system, when a discount is taken, the inventory account is credited to reduce its cost to the net amount paid. This reflects the actual cost of the inventory after taking into account the discount received.

Question 15

When the seller is liable for the shipping costs, the payment for the freight in the seller's accounts is recorded with a debit to:
A)Delivery Expense or Freight Out.
B)Freight In.
C)Inventory.
D)Cash.

Accepted Answer

When the seller is liable for the shipping costs, the expense is related to the delivery of goods to customers, thus it is recorded as a debit to Delivery Expense or Freight Out in the seller's accounts. This reflects the cost of sending goods to customers, not the cost of receiving goods for inventory.

Question 16

Under a perpetual inventory system, the entry to record the cost of goods sold would include a debit to:
A)Cost of Goods Sold and a credit to Inventory for the retail price of the inventory.
B)Inventory and a credit to Sales Revenue for the retail price of the inventory.
C)Cost of Goods Sold and a credit to Inventory for the cost of the inventory.
D)Inventory and a credit to Cost of Goods Sold for the cost of the inventory.

Accepted Answer

Under a perpetual inventory system, the cost of goods sold is recorded by debiting the Cost of Goods Sold account and crediting the Inventory account for the cost of the inventory sold, not the retail price. This reflects the reduction in inventory and recognizes the expense of goods sold.

Question 17

If a purchaser returns goods purchased on account to the supplier under a perpetual inventory system, the purchaser would debit:
A)Inventory and credit Accounts Payable.
B)Accounts Payable and credit Inventory.
C)Inventory and credit Accounts Receivable.
D)Accounts Receivable and credit Inventory.

Accepted Answer

Under a perpetual inventory system, when a purchaser returns goods previously purchased on account, the purchaser would debit Accounts Payable (to decrease the liability owed to the supplier) and credit Inventory (to decrease the inventory asset account), reflecting the return of goods.

Question 18

A purchase return or allowance under a perpetual inventory system is credited to:
A)Accounts Payable.
B)Purchase Returns and Allowances.
C)Inventory.
D)Purchases.

Accepted Answer

In a perpetual inventory system, purchase returns or allowances are credited to the Inventory account to reflect the decrease in inventory levels.

Question 19

Under a perpetual inventory system, the entry to record a sale on account would include a debit to:
A)Accounts Receivable and a credit to Sales Revenue for the retail price of the inventory.
B)Inventory and a credit to Sales Revenue for the retail price of the inventory.
C)Cost of Goods Sold and a credit to Inventory for the retail price of the inventory.
D)Accounts Receivable and a credit to Sales Revenue for the cost of the inventory.

Accepted Answer

The entry to record a sale on account under a perpetual inventory system involves debiting Accounts Receivable for the amount the customer owes (the retail price) and crediting Sales Revenue for the same amount, reflecting the revenue earned from the sale.

Question 20

Green Company purchased $3,600 of merchandise on account, terms 2/10 n/30. If payment was made after the expiration of the discount period and a perpetual inventory system is used, the entry to record the payment would include a:
A)credit to Inventory of $3,600.
B)credit to Cash of $3,528.
C)credit to Cash of $3,600.
D)debit to Accounts Payable of $3,528.

Accepted Answer

Since the payment was made after the expiration of the discount period, the full amount of $3,600 is paid without taking the 2% discount. Therefore, Cash is credited for the full amount of the invoice, $3,600.

Quiz 5: Merchandising Operations and the Accounting Cycle

Using a perpetual inventory system, the entry to record the purchase of merchandise on account involves a:

Credit terms of 1/10 n/30 indicates that the buyer is:

If the shipping terms are FOB shipping point and the freight bill is $200, the purchaser, using a perpetual inventory system would record payment of the freight with a debit to:

When a discount is taken for prompt payment under a perpetual inventory system, the purchaser would credit:

When the buyer pays the freight costs, the entry to record the payment under a perpetual inventory system would include a debit to:

Day Company purchased $3,000 of merchandise on credit, terms 3/15 n/30. The entry to record payment for the merchandise within the discount period under a perpetual inventory system would include a:

A company makes a purchase of $2,000 of inventory, subject to credit terms of 3/10 n/45 and returns $500 of inventory prior to payment. What is the amount of the payment assuming payment is made within the discount period?

Which of the following credit terms allows for a cash discount?

Mars Company purchased $2,500 of merchandise on account, terms 3/10 n/60. If payment was made within the discount period, the entry to record the payment under a perpetual inventory system would include a credit to:

The seller is responsible for the shipping costs when the shipping terms are:

When the seller accepts a return of goods from the purchaser originally sold on account, the seller's journal entry would include a debit to:

The buyer is responsible for the shipping costs when the shipping terms are:

The entry to record the sale of merchandise for cash includes a:

A merchandiser purchases inventory on account under a perpetual inventory system with terms of 2/10 n/30. The merchandiser would:

When the seller is liable for the shipping costs, the payment for the freight in the seller's accounts is recorded with a debit to:

Under a perpetual inventory system, the entry to record the cost of goods sold would include a debit to:

If a purchaser returns goods purchased on account to the supplier under a perpetual inventory system, the purchaser would debit:

A purchase return or allowance under a perpetual inventory system is credited to:

Under a perpetual inventory system, the entry to record a sale on account would include a debit to:

Green Company purchased $3,600 of merchandise on account, terms 2/10 n/30. If payment was made after the expiration of the discount period and a perpetual inventory system is used, the entry to record the payment would include a: