Question 1

When there is a return after the original voucher has been prepared, the first step is to cancel the old voucher.

Accepted Answer

This ensures that the old voucher cannot be used again, and a new voucher can be prepared for the return.

Question 2

Emily purchased $2,000 of merchandise on April 1 and recorded it in the voucher register. On April 8, $400 of the merchandise proved to be defective. The entry would be to:
A)reduce the original voucher.
B)record a purchase return in the general journal.
C)cancel the original voucher and record a revised voucher.
D)None of these answers are correct.

Accepted Answer

The answer of Emily purchased $2,000 of merchandise on April...

Question 3

Bill returned all of the $4,700 purchase of equipment to Sue. The entry to record this is:
A) 
B) 
C) 
D)None of these answers are correct.

Accepted Answer

The answer of Bill returned all of the $4,700 purchase...

Question 4

Spice Company completed the following transactions:
  Required: Prepare journal entries to record the above transactions. Assume Spice uses the gross approach method for recording purchases. Omit explanations.

Accepted Answer

The answer of Spice Company completed the following transactions:
 ...

Question 5

Grant's Hardware bought $7,500 of merchandise, terms 3/10, n/30. The journal entry to record the transaction under the net approach method would be to:
A)debit Purchases $7,275; credit Accounts Payable $7,275.
B)debit Purchases $7,275; credit Vouchers Payable $7,275.
C)debit Purchases $7,500; credit Vouchers Payable $7,275; credit Discounts Lost $225.
D)debit Purchases $7,500; credit Cash $7,500.

Accepted Answer

The answer of Grant's Hardware bought $7,500 of merchandise, terms...

Question 6

Toy Trains Company bought $5,000 of merchandise, terms 2/10, n/30. The journal entry to record the transaction under the net approach method would be to:
A)debit Purchases $4,900; credit Accounts Payable $4,900.
B)debit Purchases $5,000; credit Vouchers Payable $5,000.
C)debit Purchases $5,000; credit Vouchers Payable $4,900; credit Discounts Lost $100.
D)debit Purchases $4,900; credit Vouchers Payable $4,900.

Accepted Answer

The answer of Toy Trains Company bought $5,000 of merchandise,...

Question 7

The primary difference between the gross method and the net method of recording invoices is:
A)when the invoice is paid.
B)when the discount is recognized.
C)the gross method is only used when there are no discounts available.
D)the net method does not use a voucher system.

Accepted Answer

The primary difference between the gross method and the net method is when the discount is recognized. 
Under the gross method, the sale is recorded at the full invoice amount, and any discount received is recorded when it is taken. 
Under the net method, the sale is recorded net of the discount, and the discount is recorded at the time of sale.

Question 8

Partial payments of an original voucher require new vouchers for each approved payment.

Accepted Answer

When a partial payment is made for an original voucher, a new voucher must be created and approved for each subsequent payment.

Question 9

Brooke's Company purchased $1,500 of merchandise with terms of 2/10, n/30 and paid the invoice within the discount period. If Brooke's uses the net method of recording merchandise purchases, the $30 purchases discount is recorded in:
A)the voucher register.
B)the check register.
C)the general journal.
D)None of these answers are correct.

Accepted Answer

The answer of Brooke's Company purchased $1,500 of merchandise with...

Question 10

Any change in an already recorded voucher dictates the ________ of that voucher.

Accepted Answer

The answer of Any change in an already recorded voucher...

Question 11

A cash discount of $24 taken under the net method approach is recorded in:
A)the check register.
B)the voucher register.
C)the general journal.
D)None of these answers is correct.

Accepted Answer

The answer of A cash discount of $24 taken under...

Question 12

The Discount Lost account is used when the:
A)gross method is used and the discount is not taken.
B)gross method is used and the discount is taken.
C)net method is used and the discount is not taken.
D)net method is used and the discount is taken.

Accepted Answer

The Discount Lost account is used under the net method when the discount is not taken. This method assumes discounts will be taken and records purchases at the net amount. If the discount is not taken, the difference is recorded in the Discount Lost account, indicating an expense incurred for not taking advantage of the discount.

Question 13

Carolyn Company purchased $4,500 of merchandise with terms of 4/10, n/60 and paid the invoice within the discount period. If Brooke's uses the net method of recording merchandise purchases, the $180 purchases discount is:
A)recorded in the voucher register.
B)recorded in the check register.
C)recorded in the general journal.
D)not recorded unless the discount is lost after the discount date.

Accepted Answer

The answer of Carolyn Company purchased $4,500 of merchandise with...

Question 14

What is the internal control advantage of using the net method of accounting for merchandise purchases?
A)It highlights the inefficiency of losing purchase discounts.
B)It guarantees that all purchase discounts will be taken.
C)It automatically increases a firm's cash balance.
D)It results in a higher quality of inventory on hand for customers.

Accepted Answer

The answer of What is the internal control advantage of...

Question 15

On May 1, Garcia Corporation bought $6,000 of merchandise from Morris Corporation, terms 2/10, n/30. Garcia paid the invoice on May 6. The journal entry to record the payment under the net approach method would be to:
A)debit Vouchers Payable $6,000; credit Cash $6,000.
B)debit Vouchers Payable $6,000; credit Discounts Lost $120; credit Cash $5,880.
C)debit Vouchers Payable $5,880; credit Cash $5,880.
D)debit Vouchers Payable $5,880; debit Discounts Lost $120; credit Cash $6,000.

Accepted Answer

Under the net approach method, purchases are recorded at their net cost (gross cost less any cash discounts received). In this case, Garcia purchased merchandise for $6,000 with terms 2/10, n/30. This means that if they pay within 10 days, they can take a 2% discount ($6,000 x 2% = $120). Therefore, the net cost of the merchandise is $5,880 ($6,000 - $120). Since Garcia paid the invoice on May 6, which is within the discount period, they can take the discount and pay only $5,880. The journal entry to record the payment would be to debit Vouchers Payable $5,880 and credit Cash $5,880. The other options involve recording the discount lost, which is not necessary under the net approach method.

Question 16

If a partial payment is made after the voucher is prepared:
A)the old voucher is cancelled and a new voucher is prepared for each installment.
B)the old voucher is credited for the entire amount.
C)Vouchers Payable is debited; Purchases Returns and Allowances is credited.
D)None of these answers are correct.

Accepted Answer

If a partial payment is made after the voucher is prepared, the old voucher is cancelled and a new voucher is prepared for each installment. This ensures accurate accounting and tracking of payments made towards the original purchase.

Question 17

If the net approach method is applied, the purchase of $6,500 of merchandise with terms 3/20, n/60 is recorded by:
A)debit Cash $6,500; credit Accounts Payable $6,500.
B)debit Accounts Payable $6,500; credit Purchases $6,500.
C)debit Purchases $6,305; credit Accounts Payable $6,305.
D)debit Purchases $6,305; credit Vouchers Payable $6,305.

Accepted Answer

The answer of If the net approach method is applied,...

Question 18

If a purchase return or allowance occurs after the posting of the original voucher, the original voucher is cancelled.

Accepted Answer

When a purchase return or allowance occurs after the posting of the original voucher, the original voucher is cancelled and a new voucher is prepared to record the return or allowance.

Question 19

If the net approach method is applied, the purchase of $2,000 of merchandise with terms 2/10, n/30 is recorded by:
A)debit Cash $2,000; credit Accounts Payable $2,000.
B)debit Accounts Payable $2,000; credit Purchases $2,000.
C)debit Purchases $2,000; credit Accounts Payable $2,000.
D)debit Purchases $1,960; credit Vouchers Payable $1,960.

Accepted Answer

The net approach method involves recording the purchase at the net cost (after the discount) and then recording the payment of the remaining amount if paid within the credit period. Therefore, the purchase of $2,000 is recorded as a debit to Purchases for $1,960 (2% discount of $2,000) and a credit to Accounts Payable for $1,960. The remaining $40 ($2,000 - $1,960) would be recorded as a debit to Accounts Payable and a credit to Cash if paid within 30 days. However, the question does not specify whether the payment was made within the credit period, so we cannot assume this step was taken.

Question 20

Laird Corporation bought $2,000 of merchandise from Woods Corporation, terms 2/10, n/30. The journal entry to record the payment under the net approach method after the discount period would be to:
A)debit Vouchers Payable $2,000; credit Cash $2,000.
B)debit Vouchers Payable $2,000; credit Discounts Lost $40; credit Cash $1,960.
C)debit Vouchers Payable $1,960; credit Cash $1,960.
D)debit Vouchers Payable $1,960; debit Discounts Lost $40; credit Cash $2,000.

Accepted Answer

Under the net method, purchases are initially recorded at net of discount. If the payment is made after the discount period, the discount not taken is recorded as an expense (Discounts Lost). Therefore, the entry includes debiting Vouchers Payable for the net amount ($1,960), debiting Discounts Lost for the discount not taken ($40), and crediting Cash for the total payment ($2,000).

Quiz 23: The Voucher System

When there is a return after the original voucher has been prepared, the first step is to cancel the old voucher.

Emily purchased $2,000 of merchandise on April 1 and recorded it in the voucher register. On April 8, $400 of the merchandise proved to be defective. The entry would be to:

Bill returned all of the $4,700 purchase of equipment to Sue. The entry to record this is:

Spice Company completed the following transactions: Required: Prepare journal entries to record the above transactions. Assume Spice uses the gross approach method for recording purchases. Omit explanations.

Grant's Hardware bought $7,500 of merchandise, terms 3/10, n/30. The journal entry to record the transaction under the net approach method would be to:

Toy Trains Company bought $5,000 of merchandise, terms 2/10, n/30. The journal entry to record the transaction under the net approach method would be to:

The primary difference between the gross method and the net method of recording invoices is:

Partial payments of an original voucher require new vouchers for each approved payment.

Brooke's Company purchased $1,500 of merchandise with terms of 2/10, n/30 and paid the invoice within the discount period. If Brooke's uses the net method of recording merchandise purchases, the $30 purchases discount is recorded in:

Any change in an already recorded voucher dictates the ________ of that voucher.

A cash discount of $24 taken under the net method approach is recorded in:

The Discount Lost account is used when the:

Carolyn Company purchased $4,500 of merchandise with terms of 4/10, n/60 and paid the invoice within the discount period. If Brooke's uses the net method of recording merchandise purchases, the $180 purchases discount is:

What is the internal control advantage of using the net method of accounting for merchandise purchases?

On May 1, Garcia Corporation bought $6,000 of merchandise from Morris Corporation, terms 2/10, n/30. Garcia paid the invoice on May 6. The journal entry to record the payment under the net approach method would be to:

If a partial payment is made after the voucher is prepared:

If the net approach method is applied, the purchase of $6,500 of merchandise with terms 3/20, n/60 is recorded by:

If a purchase return or allowance occurs after the posting of the original voucher, the original voucher is cancelled.

If the net approach method is applied, the purchase of $2,000 of merchandise with terms 2/10, n/30 is recorded by:

Laird Corporation bought $2,000 of merchandise from Woods Corporation, terms 2/10, n/30. The journal entry to record the payment under the net approach method after the discount period would be to: