Question 1

GiGi's Sporting Goods uses special journals. If a credit customer returns $400 of goods on which
$24 of sales tax was charged, the journal entry to record the return would include:
A)a credit to the Sales Tax Payable account for $24.
B)a debit to the Sales Returns and Allowances account for $424.
C)a credit to the Accounts Receivable account for $424.
D)a debit to the Sales account for $400.

Accepted Answer

The answer of GiGi's Sporting Goods uses special journals. If...

Question 2

If a firm had sales of $68,000 during a period and sales returns and allowances of $5,600, its net sales were
A)$5,600.
B)$73,600.
C)$68,000.
D)$62,400.

Accepted Answer

Net sales are calculated by subtracting sales returns and allowances from total sales. Therefore, $68,000 - $5,600 = $62,400.

Question 3

The Sales Returns and Allowances account is classified as
A)an asset account.
B)a contra asset account.
C)a revenue account.
D)a contra revenue account.

Accepted Answer

The Sales Returns and Allowances account is a type of contra revenue account because it represents transactions that reduce the overall revenue earned by the company. When a customer returns a product or receives a discount, the amount of revenue originally recognized on the sale is reduced. This reduction is recorded in the Sales Returns and Allowances account, which is subtracted from the company's total sales revenue to calculate the net sales figure.

Question 4

In a sales journal used to record taxable sales, the total of the Accounts Receivable column should equal
A)the total of the Sales column.
B)the total of the Sales Tax Payable column.
C)the sum of the totals of the Sales Tax Payable column and the Sales column.
D)the difference between the total of the Sales Tax Payable column and the total of the Sales column.

Accepted Answer

The total of the Accounts Receivable column in a sales journal used to record taxable sales should equal the sum of the totals of the Sales Tax Payable column and the Sales column. This is because the amount receivable from customers includes both the sales amount and the sales tax charged on those sales.

Question 5

In May, a retailer recorded credit sales of $10,000. Assuming the sales tax rate is 7 percent, the entry to record the sales in the sales journal would include:
A)a credit to Sales of $10,700.
B)a debit to Accounts Receivable of $10,700.
C)a debit to Sales Tax Payable of $700.
D)a credit to Accounts Receivable of $10,700.

Accepted Answer

The entry to record the sales in the sales journal would include a credit to Accounts Receivable for $10,700, which includes the sales amount of $10,000 and the sales tax of $700.

Question 6

After all postings have been made, the total of the schedule of accounts receivable should equal
A)the balance of the Accounts Receivable account in the general ledger.
B)the total of the Accounts Receivable Debit column in the sales journal.
C)the total of all sales on account for the accounting period.
D)the balance of the Sales account.

Accepted Answer

The schedule of accounts receivable should include all outstanding customer balances as of a specific point in time. These balances should match the total of the Accounts Receivable account in the general ledger, as this is the controlling account for all accounts receivable transactions. The other options are not accurate because the schedule should not include all sales on account for the period (only outstanding balances), and the Sales account balance does not necessarily reflect the accounts receivable balance.

Question 7

Which of the following statements is correct?
A)To provide an adequate audit trail, sales on credit should be recorded in both the sales journal and the general journal.
B)The complete information for each sale of merchandise on credit can be recorded on one line of the general journal.
C)The sales journal is used for recording both cash sales and credit sales.
D)Since the sales journal is used for a single purpose, there is no need to enter any descriptions.

Accepted Answer

The sales journal is used specifically for recording credit sales, and since it serves a single purpose, detailed descriptions are not typically necessary.

Question 8

To find the balance due from an individual customer, the accountant would refer to
A)the sales journal.
B)the accounts receivable subsidiary ledger.
C)the Accounts Receivable account in the general ledger.
D)the Sales account in the general ledger.

Accepted Answer

The accounts receivable subsidiary ledger contains individual customer accounts and their respective balances, making it the best choice for finding the balance due from an individual customer. The sales journal and sales account in the general ledger contain information about sales transactions but do not provide specific information about individual customer balances. The Accounts Receivable account in the general ledger provides an overall balance for all accounts receivable, but again does not provide specific information about individual customer balances.

Question 9

Ables Budget Boutique uses special journals. If a credit customer returns $40 of goods on which $3 of sales tax was charged, identify the statement below that would be correct when posting the transaction.
A)A credit of $40 would be posted to the customer's account in the accounts receivable ledger.
B)A debit of $43 would be posted to the customer's account in the accounts receivable ledger.
C)A credit of $43 would be posted to the customer's account in the accounts receivable ledger.
D)A debit of $40 would be posted to the customer's account in the accounts receivable ledger.

Accepted Answer

The total amount of $43 (including the $3 sales tax) would be credited to the customer's account in the accounts receivable ledger to reflect the return.

Question 10

A wholesale firm sold merchandise with a list price of $1,800 and trade discounts of 30 and 15 percent. What amount will be credited to sales in the sales journal?
A)$1,800
B)$810
C)$990
D)$1,071

Accepted Answer

The net price of the merchandise can be found by multiplying the list price by the complement of the trade discounts: 
$1800 × 0.7 × 0.85 = $1,071 
Therefore, the amount credited to sales in the sales journal is $1,071.

Question 11

Which of the following statements is not correct?
A)When special journals are used, postings to the accounts receivable account in the general ledger are usually made once a month on the last day of the month.
B)Before any posting to the subsidiary ledger takes place, the equality of the debits and credits recorded in the sales journal are proved by comparing and cross footing the column totals.
C)Before any posting to the general ledger takes place, the equality of the debits and credits recorded in the sales journal are proved by comparing and cross footing the column totals.
D)Postings to the accounts receivable subsidiary ledger are usually made once a month on the last day of the month.

Accepted Answer

Postings to the accounts receivable subsidiary ledger are typically made daily, not monthly. This ensures that the subsidiary ledger is always up-to-date, reflecting each customer's current balance. Monthly postings are more common for the general ledger summary accounts.

Question 12

The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes
A)a debit to Accounts Receivable and a credit to Sales Returns and Allowances.
B)a debit to Sales Returns and Allowances and a credit to Accounts Receivable.
C)a debit to Sales and a credit to Sales Returns and Allowances.
D)a debit to Sales and a credit to Accounts Receivable.

Accepted Answer

When a credit customer returns defective merchandise, the account credited should be Sales Returns and Allowances. And the account debited should be Accounts Receivable as the amount that was credited from the sale should be reduced. Since no sales tax was charged, there is no need to include a sales tax account in the entry. Hence, option B is the correct answer.

Question 13

The Sales Returns and Allowances account is presented
A)on the income statement as an addition to Sales.
B)on the income statement as a deduction from Sales.
C)on the balance sheet as a deduction from Capital.
D)on the balance sheet as a deduction from Accounts Receivable.

Accepted Answer

The Sales Returns and Allowances account is a contra-revenue account and is presented on the income statement as a deduction from Sales. It is used to reduce the amount of revenue reported when goods or services are returned or allowances are granted to customers.

Question 14

Which of the following statements is not correct?
A)The sales slip is the source document for sales on credit transactions.
B)A journal that is used to record only one type of a transaction is called a special journal.
C)Use of a sales journal eliminates repetition in posting individual entries to the Accounts Receivable account in the general ledger.
D)If the firm must collect sales tax on retail transactions, the sales journal should have a Sales Tax Payable Debit column.

Accepted Answer

The correct statement regarding sales tax in accounting is that it should be recorded in a Sales Tax Payable Credit column, not a Debit column, because sales tax collected on behalf of the government is a liability, not an expense.

Question 15

A wholesale business sells goods with a list price of $1,200 and a trade discount of 30 percent. The net price is
A)$1,560.
B)$360.
C)$840.
D)$1,200.

Accepted Answer

To find the net price of the goods, we need to subtract the trade discount from the list price:
Discount = 30% of $1,200 = 0.3 x $1,200 = $360
Net price = List price - Discount = $1,200 - $360 = $840. Therefore, the answer is choice C, $840.

Question 16

A retailer recorded the following in June: cash sales $2,500; credit sales, $11,000; sales returns and allowances, $1,150. Assuming the sales tax rate is 6 percent, the entry to record the sales tax payment includes a debit to Sales Tax Payable for
A)$810.
B)$660.
C)$741.
D)$879.

Accepted Answer

The total sales are the sum of cash sales and credit sales, which is $2,500 + $11,000 = $13,500. Sales returns and allowances amount to $1,150, so the net sales are $13,500 - $1,150 = $12,350. The sales tax is calculated on this net amount at a rate of 6%, so the sales tax payable is $12,350 * 0.06 = $741.

Question 17

ABC Skiing Essentials uses special journals. If a credit customer returns $8,000 of goods on which
$560 of sales tax was charged, select the correct entry to record the return:
A)

B)

C)

D)

Accepted Answer

Recording a sales return requires debiting Sales Returns and Allowances, crediting Accounts Receivable for the amount of goods returned, and crediting Sales Tax Payable for the amount of sales tax charged on the returned items. Choice A reflects this three-way entry, resulting in a net credit of $8,560. Choice B only records the return of the goods and the sales tax charged, without reducing the Accounts Receivable balance. Choice C records only the return of the goods, without accounting for the sales tax charged. Choice D records only the return of the goods, without reducing the Accounts Receivable balance or accounting for the sales tax charged.

Question 18

If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in
A)the general journal.
B)the cash payments journal.
C)the sales journal.
D)the cash receipts journal.

Accepted Answer

If the firm does not have a specific sales returns and allowances journal, the entries for these transactions would be made in the general journal, as it is a catch-all journal for transactions that don't have a specific journal to record them in. The entries would then be posted to the appropriate accounts in the general ledger.

Question 19

Merchandise is sold on credit for $900 plus 5 percent sales tax. The entry in the sales journal will include a debit to Accounts Receivable for
A)$905.00.
B)$945.00.
C)$904.50.
D)$900.00.

Accepted Answer

The correct entry includes the sales amount plus the 5 percent sales tax, so $900 + ($900 * 0.05) = $900 + $45 = $945.00.

Question 20

The amount used by wholesalers to record sales in its sales journal is
A)the retail price.
B)the net price.
C)the list price.
D)the original price.

Accepted Answer

Wholesalers usually record sales in their sales journal at the net price, which is the original price minus any discounts or allowances. The net price is what the wholesaler actually receives from the buyer. The retail price is the price at which the wholesaler sells the goods to the retailers, and the list price is the suggested selling price for the goods.

Quiz 7: Accounting for Sales and Accounts Receivable

GiGi's Sporting Goods uses special journals. If a credit customer returns $400 of goods on which $24 of sales tax was charged, the journal entry to record the return would include:

If a firm had sales of $68,000 during a period and sales returns and allowances of $5,600, its net sales were

The Sales Returns and Allowances account is classified as

In a sales journal used to record taxable sales, the total of the Accounts Receivable column should equal

In May, a retailer recorded credit sales of $10,000. Assuming the sales tax rate is 7 percent, the entry to record the sales in the sales journal would include:

After all postings have been made, the total of the schedule of accounts receivable should equal

Which of the following statements is correct?

To find the balance due from an individual customer, the accountant would refer to

Ables Budget Boutique uses special journals. If a credit customer returns $40 of goods on which $3 of sales tax was charged, identify the statement below that would be correct when posting the transaction.

A wholesale firm sold merchandise with a list price of $1,800 and trade discounts of 30 and 15 percent. What amount will be credited to sales in the sales journal?

Which of the following statements is not correct?

The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes

The Sales Returns and Allowances account is presented

Which of the following statements is not correct?

A wholesale business sells goods with a list price of $1,200 and a trade discount of 30 percent. The net price is

A retailer recorded the following in June: cash sales $2,500; credit sales, $11,000; sales returns and allowances, $1,150. Assuming the sales tax rate is 6 percent, the entry to record the sales tax payment includes a debit to Sales Tax Payable for

ABC Skiing Essentials uses special journals. If a credit customer returns $8,000 of goods on which $560 of sales tax was charged, select the correct entry to record the return:

If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in

Merchandise is sold on credit for $900 plus 5 percent sales tax. The entry in the sales journal will include a debit to Accounts Receivable for

The amount used by wholesalers to record sales in its sales journal is