Question 1

Best Value Furniture uses the periodic inventory system to account for its inventory. It purchased
$2,000 of goods from its supplier but later returned $400 of the goods due to damage. Best Value would record the return by:
A)debiting Accounts Payable, crediting Purchases Purchase Returns and Allowances
B)debiting Sales Returns and Allowances, crediting Accounts Receivable
C)debiting Purchases Returns and Allowances, crediting Accounts Payable
D)debiting Accounts Payable, crediting Purchases

Accepted Answer

The answer of Best Value Furniture uses the periodic inventory...

Question 2

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $5,280 as of November 1. During November Tune Tones purchased merchandise from Mandy Lynn totaling
$10,180 and made payments on account to Mandy Lynn in the amount of $6,300. The amount Tune Tones owes Mandy Lynn on November 30 is:
A)$10,180
B)$11,580
C)$9,160
D)$5,280

Accepted Answer

Starting with the amount Tune Tones owes on November 1: $5,280
Then, adding the merchandise purchased during November: $5,280 + $10,180 = $15,460
Finally, subtracting the payments made during November: $15,460 - $6,300 = $9,160
Therefore, Tune Tones owes Mandy Lynn $9,160 on November 30.

Question 3

If a perpetual inventory system is used instead of a periodic system, identify the accounts that the Merchandise Inventory account replaces. A)Purchases, Sales, Freight In B)Purchases, Cost of Goods Sold C)Purchases, Accounts Receivable, Freight In D)Purchases, Purchase Returns and Allowances, Freight In

Accepted Answer

In a perpetual inventory system, the Merchandise Inventory account is continuously updated for purchases, purchase returns and allowances, and freight in costs, replacing the need for separate accounts for these items as used in a periodic system.

Question 4

Which of the following accounts has a normal debit balance?
A)Purchase Returns
B)Sales
C)Purchases
D)Accounts Payable

Accepted Answer

Purchases account typically has a normal debit balance as it represents the cost of goods bought for resale.

Question 5

Skiing International uses a perpetual inventory system when recording its purchases and sales of inventory. If the business purchases $8,000 of goods on account, select the correct entry to record the purchase:
A)

B)

C)

D)

Accepted Answer

In a perpetual inventory system, purchases of inventory are recorded with a debit to the Merchandise Inventory account and a credit to the Accounts Payable account. Option A and B are incorrect because there is no debit to the Merchandise Inventory account. Option D is incorrect because it records the purchase as a cash transaction when it was made on account.

Question 6

If a company uses a perpetual inventory system when recording its purchases and sales of inventory, the entry to record the freight charges on a purchase of merchandise on account would include:
A)a debit to Merchandise Inventory and a credit to Accounts Payable
B)a debit to Cost of Goods Sold and a credit to Merchandise Inventory
C)a debit to Accounts Payable and a credit to Merchandise Inventory
D)a debit to Merchandise Inventory and a credit to Cost of Goods Sold

Accepted Answer

Under a perpetual inventory system, freight charges on purchases are added to the cost of inventory. Therefore, the entry to record freight charges would include a debit to Merchandise Inventory (increasing the inventory cost) and a credit to Accounts Payable (reflecting the liability to pay the freight charges).

Question 7

Bally Boutique uses a perpetual inventory system when recording its purchases and sales of inventory. The business sells $6,000 of goods to charge account customers and the goods originally cost Bally, $3,000. The entry to record the sale would include:
A)a debit to Merchandise Inventory for $3,000 and a credit to Cost of Goods Sold for $3,000
B)a debit to Accounts Receivable for $3,000 and a credit to Sales for $3,000
C)a debit to Cost of Goods Sold for $3,000 and a credit to Merchandise Inventory for $3,000
D)a debit to Sales for $6,000 and a credit to Merchandise Inventory for $6,000

Accepted Answer

The entry to record the sale would involve removing the cost of the goods sold from merchandise inventory and recognizing it as an expense in the form of Cost of Goods Sold. Therefore, option C is the correct answer. Option A would decrease the inventory twice, which is incorrect. Option B would record only the revenue and not the cost of goods sold. Option D would overstate the revenue by not accounting for the cost of goods sold.

Question 8

The journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid by their supplier and added to the invoice is:
A)debit Accounts Receivable $965; credit Sales $965
B)debit Purchases $900, debit Freight In $65; credit Accounts Payable $965
C)debit Purchases $965; credit Accounts Payable $965
D)debit Accounts Payable $965, credit Freight in $65; credit Purchases $900

Accepted Answer

The purchase of merchandise on account should be recorded as a debit to the Purchases account for $900 and a debit to the Freight In account for $65 (since it was prepaid by the supplier and added to the invoice). The total amount of the invoice is $965, which should be credited to the Accounts Payable account. Therefore, the correct journal entry is debit Purchases $900, debit Freight In $65; credit Accounts Payable $965.

Question 9

The amount of Freight In for a period is reported on:
A)the balance sheet
B)the statement of owner's equity
C)the income statement.
D)it is not reported on any statement.

Accepted Answer

The amount of Freight In is part of the Cost of Goods Sold and is reported on the Income Statement. It is not reported on the Balance Sheet or Statement of Owner's Equity as it does not affect the assets or equity of the business.

Question 10

During March a firm purchased $36,500 of merchandise and paid freight charges of $5,280. If the net delivered cost of purchases at the end of March is $33,080, what is the total purchase returns for March?
A)$8,700
B)$3,420
C)$1,860
D)$0

Accepted Answer

The total cost of purchases including freight charges is $36,500 + $5,280 = $41,780. If the net delivered cost is $33,080, then the total purchase returns must be $41,780 - $33,080 = $8,700.

Question 11

If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a(n):
A)decrease to Fees Income.
B)decrease to accounts payable.
C)increase to accounts receivable.
D)increase of capital.

Accepted Answer

When a business pays $1,100 on account to a creditor, it means that they are reducing their accounts payable (the debt they owe to the creditor). Therefore, the effect of the payment is a decrease to cash (because cash is leaving the business) and a decrease to accounts payable. The other options are not relevant to this transaction.

Question 12

If the perpetual inventory system is used to record the purchase and sale of goods, the account used to record shipping charges is the:
A)merchandise inventory account.
B)purchases account.
C)freight in account.
D)transportation in account.

Accepted Answer

The perpetual inventory system records shipping charges directly to the merchandise inventory account, as these costs are considered part of the cost of acquiring inventory.

Question 13

A firm had purchases of $14,600, freight charges of $870, and purchases returns and allowances of
$1,350 during one month. Its net delivered cost of purchases was:
A)$12,380.
B)$14,120.
C)$15,080.
D)$16,820.

Accepted Answer

The net delivered cost of purchases is calculated by adding the freight charges to the purchases and then subtracting any purchases returns and allowances. So, $14,600 (purchases) + $870 (freight charges) - $1,350 (returns and allowances) = $14,120.

Question 14

For good internal control of purchases, businesses should do all of the following except:
A)Ensure that the same person is involved in the process of buying, receiving and paying for the goods.
B)Another person other than the person requesting the purchase should write the check for the payment of the invoice.
C)Computations on the invoice should be checked for accuracy.
D)Goods should be carefully checked when received.

Accepted Answer

Good internal control over purchases requires segregation of duties. Therefore, it is not advisable for the same person to be involved in the process of buying, receiving and paying for the goods.

Question 15

Hugh Snow returned merchandise to Farley Co. The entry on Hugh Snow's books to record the return of merchandise to Farley Co. would include a:
A)Debit Sales Returns and Allowances
B)Debit Accounts Payable
C)Credit to Purchases Returns and Allowances
D)Debit to Account Receivable

Accepted Answer

The answer of Hugh Snow returned merchandise to Farley Co....

Question 16

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid by their supplier and added to the invoice is:
A)debit Accounts Payable $2,875, debit Freight in $125; credit Purchases $2,750
B)debit Accounts Receivable $2,875; credit Sales $2,875
C)debit Purchases $2,750, debit Freight In $125; credit Accounts Payable $2,875
D)debit Purchases $2,750; credit Accounts Payable $2,750

Accepted Answer

The purchase of merchandise on account is recorded with a debit to Purchases and a credit to Accounts Payable. The freight in cost of $125 is also recorded as a debit to Freight In and a credit to Accounts Payable. Therefore, option C is correct. Option A is incorrect because it debits Accounts Payable instead of crediting it. Option B is incorrect as it records a sale rather than purchase. Option D is incorrect because it does not record the freight in cost.

Question 17

If the perpetual inventory system is used to record the purchase and sale of goods, the account used to record the return of merchandise is the:
A)merchandise inventory account
B)purchases account
C)purchase returns and allowances account
D)transportation in account

Accepted Answer

The perpetual inventory system continuously updates inventory records, including returns. Thus, returns are recorded in the merchandise inventory account, decreasing the inventory value.

Question 18

A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1. After a transaction of $12,800 is posted from the purchases journal and a transaction of $9,200 is posted from the cash payments journal, the balance of the creditor's account on April 30 is:
A)$14,160 credit
B)$9,200 debit
C)$12,800 debit
D)$6,960 credit

Accepted Answer

The initial balance is a credit of $10,560. Adding a purchase of $12,800 increases the credit balance to $23,360. Paying $9,200 reduces the credit balance to $14,160.

Question 19

The amount of the purchases for a period is presented as:
A)an asset on the balance sheet.
B)an expense on the income statement.
C)an expense on the cost of purchases statement.
D)contra revenue on the income statement.

Accepted Answer

The amount of purchases is considered an expense on the income statement because it represents the cost of goods or materials purchased by the company during the period. This expense is matched against revenues generated during the same period to determine the net income or loss for the business.

Question 20

To record a return of merchandise purchased for cash on the books of the buyer, the accountant would:
A)debit Purchases Returns and Allowances and credit Cash.
B)debit Purchases and credit Purchases Returns and Allowances.
C)debit Purchases Returns and Allowances and credit Purchases.
D)debit Cash and credit Purchases Returns and Allowances.

Accepted Answer

The answer of To record a return of merchandise purchased...

Quiz 8: Accounting for Purchases and Accounts Payable

Best Value Furniture uses the periodic inventory system to account for its inventory. It purchased $2,000 of goods from its supplier but later returned $400 of the goods due to damage. Best Value would record the return by:

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $5,280 as of November 1. During November Tune Tones purchased merchandise from Mandy Lynn totaling $10,180 and made payments on account to Mandy Lynn in the amount of $6,300. The amount Tune Tones owes Mandy Lynn on November 30 is:

If a perpetual inventory system is used instead of a periodic system, identify the accounts that the Merchandise Inventory account replaces.

Which of the following accounts has a normal debit balance?

Skiing International uses a perpetual inventory system when recording its purchases and sales of inventory. If the business purchases $8,000 of goods on account, select the correct entry to record the purchase:

If a company uses a perpetual inventory system when recording its purchases and sales of inventory, the entry to record the freight charges on a purchase of merchandise on account would include:

Bally Boutique uses a perpetual inventory system when recording its purchases and sales of inventory. The business sells $6,000 of goods to charge account customers and the goods originally cost Bally, $3,000. The entry to record the sale would include:

The journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid by their supplier and added to the invoice is:

The amount of Freight In for a period is reported on:

During March a firm purchased $36,500 of merchandise and paid freight charges of $5,280. If the net delivered cost of purchases at the end of March is $33,080, what is the total purchase returns for March?

If a business pays $1,100 on account to a creditor, the effect of the payment is a decrease to cash and a(n) :

If the perpetual inventory system is used to record the purchase and sale of goods, the account used to record shipping charges is the:

A firm had purchases of $14,600, freight charges of $870, and purchases returns and allowances of $1,350 during one month. Its net delivered cost of purchases was:

For good internal control of purchases, businesses should do all of the following except:

Hugh Snow returned merchandise to Farley Co. The entry on Hugh Snow's books to record the return of merchandise to Farley Co. would include a:

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid by their supplier and added to the invoice is:

If the perpetual inventory system is used to record the purchase and sale of goods, the account used to record the return of merchandise is the:

A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1. After a transaction of $12,800 is posted from the purchases journal and a transaction of $9,200 is posted from the cash payments journal, the balance of the creditor's account on April 30 is:

The amount of the purchases for a period is presented as:

To record a return of merchandise purchased for cash on the books of the buyer, the accountant would: