1.

Based on the following information, what would be recorded as purchases discount if the invoice is

paid within the discount period?

1. 5,000 of merchandise inventory was ordered on April 2, 2021

2. 2,000 of this merchandise was received on April 5, 2021

3. On April 6, 2021, an invoice dated April 4, 2021, with terms of 2/10, net 30 for 2,150 which

included a 150 prepaid freight cost, was received.

4. On April 10, 2021, 500 of the merchandise was returned to the seller.

a. 100 b. 30 c. 43 d. 33

2. Which account is not classified as a selling expense?

a. Sales Salaries

b. Transportation-Out

c. Sales Discounts

d. Advertising Expense

3. Merchandise with a sales price of 500 is sold on account with term 2/10, n/30. The journal entry to

record the sale would include a

a. debit to Cash for 500

b. Debit to Sales Discounts for 10

c. Credit to Sales for 500

d. Debit to Accounts Receivable for 490

4. If the seller is to pay the transportation costs of delivering merchandise, the delivery terms are stated

as

a. FOB shipping point

b. FOB destination

c. FOB n/30

d. FOB seller

5. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for

15,000. The seller paid transportation costs of 1,000 and issued a credit memorandum -return of

merchandise for 5,000 prior to payment. What is the amount of the cash discount allowable?

a. 160 b. 150 c. 140 d. 100

6. Discounts taken by a buyer because of early payment are recorded on the seller’s accounting records

as

a. Purchases discount

b. Sales discount

c. Trade discount

d. Early payment discount

7. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the

terms are

a. n/30

b. FOB shipping point

c. FOB destination

d. consigned

8. A retailer purchases merchandise with a catalog list price of 10,000. The retailer receives a 25% trade

discount and credit terms of 2/10, n/30. How much cash will be needed to pay this invoice within the

discount period?

a. 10,000

b. 7,500

c. 9,800

d. 7,350

9. Based on the following information, what would be recorded as the cash payment if the invoice is

paid within the discount period?

1. 5,000 of merchandise inventory was ordered on April 2, 2021

2. 2,000 of this merchandise was received on April 5, 2021

3. On April 6, 2021, an invoice dated April 4, 2021, with terms of 2/10, net 30 for 2,150

which included a 150 prepaid freight cost, was received.

4. On April 10, 2021, 500 of the merchandise was returned to the seller.

a. 1,470

b. 1,520
c. 2,150

d. 1,620

10. Orange Co. sold Red Co. merchandise on account FOB shipping point, 2/10, net 30, for 10,000.

Orange Co. prepaid the 200 shipping charge. Using the perpetual inventory method, which of the

following entries will Red Co. make if Red Co. pays within the discount period?

a. Accounts Payable-Orange Co., debit 10,000; Transportation In, credit 200; Cash, credit 9,800

b. Accounts Payable-Orange Co., debit 10,200; Merchandise Inventory, credit 200; Cash, credit 10,000

c. Accounts Payable-Orange Co., debit 10,000; Transportation In, debit 200; Cash, credit 10,200

d. Accounts Payable-Orange Co., debit 10,200; Merchandise Inventory, debit 200; Cash, credit 10,400

11. Based on the following information, what would be recorded as net purchases amount after all of

the transactions have been recorded?

1. 5,000 of merchandise inventory was ordered on April 2, 2021

2. 2,000 of this merchandise was received on April 5, 2021

3. On April 6, 2021, an invoice dated April 4, 2021, with terms of 2/10, net 30 for 2,150

which included a 150 prepaid freight cost, was received.

4. On April 10, 2021, 500 of the merchandise was returned to the seller.

a. 2,000

b. 2,150

c. 1,620

d. 1,470

12. Merchandise with an invoice price of 4,000 is purchased on June 2 subject to terms of 2/10, n/30,

FOB destination. Transportation costs paid by the seller totaled 150. What is the cost of the

merchandise if paid on June 12, assuming the discount is taken?

a. 4,150 b. 4,070 c. 4,067 d. 3,920

13. Using a perpetual inventory system, the entry to record the return of merchandise purchased on

account includes a

a. debit to Cost of Goods Sold

b. credit to Accounts Payable

c. credit to Merchandise Inventory

d. credit to Sales

14. Black Company sold Red Company merchandise on account FOB shipping point, 2/10, net 30, for

10,000. Black prepaid the 200 shipping charge. Which of the following entries does Black make to record

this sale?

a. Accounts Receivable-Red, debit 10,000; Sales, credit 10,000

b. Accounts Receivable-Red, debit 10,000; Sales, credit 10,000, and Accounts Receivable-Red, debit
200;

Cash, credit 200

c. Accounts Receivable-Red, debit 10,400; Sales, credit 10,400

d. Accounts Receivable-Red, debit 10,000; Sales, credit 10,000, and Transportation Out, debit 200; Cash,

credit 200

15. Silver Co. sold merchandise to Bronze Co. on account, 23,000, terms 2/15, net 45. The cost of the

merchandise sold is 18,500. Silver Co. issued a credit memorandum for 2,500 for merchandise returned

that originally cost 1,900. The Bronze Co. paid the invoice within the discount period.

What is amount of net sales from the above transactions?

a. 20,090

b. 20,500

c. 3,490

d. 23,000

16. In recording the cost of merchandise sold for cash, based on data available from perpetual inventory

records, the journal entry is

a. debit Cost of Merchandise Sold; credit Sales

b. debit Cost of Merchandise Sold; credit Merchandise Inventory

c. debit Merchandise Inventory; credit Cost of Merchandise Sold

d. debit Accounts Receivable; credit Merchandise Inventory

17. When goods are shipped FOB destination and the seller pays the transportation charges, the buyer

a. journalizes a reduction for the cost of the merchandise.

b. journalizes a reimbursement to the seller.

c. does not take a discount.

d. makes no journal entry for the transportation.

18. When merchandise is returned under the perpetual inventory system, the buyer would credit

a. Merchandise Inventory

b. Purchases Returns and Allowances

c. Accounts Payable

d. depending on the inventory system used.

19. A company purchased $3,100 of merchandise on July 5 with terms 3/10, n/30. On July 7, it returned

$340 worth of merchandise. On July 8, it paid the full amount due. The amount of the cash paid on July 8

is:

2677.2

20. A company purchased $3,300 worth of merchandise. Transportation costs were an additional $290.

The company returned $230 worth of merchandise and then paid the invoice within the 3% cash

discount period. The total cost of this merchandise is:

3262.9

21. Net income plus operating expenses is equal to

a. cost of goods sold

b. cost of goods available for sale

c. net sales

d. gross profit

22. Garza Company had sales of $150,200, sales discounts of $2,250, freight-in of $100, Transportation-

out of $332, and sales returns of $3,605. Garza Company's net sales equals:

144,345

23. in an agreement between the seller and the buyer of “Freight Prepaid”, who should shoulder the

obligation?

a. Buyer
b. Seller

c. Courier

d. Answer cannot be determined based on given information

24. in an agreement between the seller and the buyer of “FOB shipping point”, who actually paid in

cash?

a. Buyer

b. Seller

c. Courier

d. Answer cannot be determined based on given information

25. In perpetual inventory system, which account would not appear as “Merchandise Inventories”?

a. Purchases

b. Purchase discount

c. Sales return

d. Freight-In