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Question(s) / Instruction(s):

Weygandt, Accounting Principles, 9e

1.            Geran Company purchased merchandise inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Geran Company pays within the discount period?

a.            $4,600

b.            $4,900

c.             $5,000

d.            $4,500


 

2.            If a company is given credit terms of 2/10, n/30, it should

a.            hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.

b.            pay within the credit period but dont take the trouble to invest the cash while waiting to pay the bill.

c.             pay within the discount period and recognize a savings.

d.            recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.


 

3.            Stan’s Market recorded the following events involving a recent purchase of merchandise:

                Received goods for $20,000, terms 2/10, n/30.

                Returned $400 of the shipment for credit.

                Paid $100 freight on the shipment.

                Paid the invoice within the discount period.

As a result of these events, the company’s merchandise inventory

a.            increased by $19,308.

b.            increased by $19,700.

c.             increased by $19,306.

d.            increased by $19,208


 

4.            A credit sale of $900 is made on July 15, terms 2/10, n/30, on which a return of $50 is granted on July 18. What amount is received as payment in full on July 24?

a.            $833

b.            $882

c.             $900

d.            $850


 

5.            Rowland Company reported the following balances at June 30, 2010:

                Sales                                                                      $10,800

                Sales Returns and Allowances                    400

                Sales Discounts                                                 200

                Cost of Goods Sold                                          5,000

Net sales for the month is

a.            $10,200.

b.            $10,800.

c.             $5,200.

d.            $10,400.


 

6.            Which one of the following is shown on a multiple-step but not on a single-step income statement?

a.            Gross profit

b.            Net sales

c.             Cost of goods sold

d.            Net income


7.            In terms of liquidity, merchandise inventory is

a.            more liquid than prepaid expenses.

b.            less liquid than store equipment.

c.             more liquid than cash.

d.            more liquid than accounts receivable.


 

8.            During August, 2010, Joes Supply Store generated revenues of $30,000. The companys expenses were as follows: cost of goods sold of $12,000 and operating expenses of $2,000. The company also had rent revenue of $500 and a gain on the sale of a delivery truck of $1,000.

Joes net income for August, 2010 is

a.            $16,500.

b.            $16,000.

c.             $18,000.

d.            $17,500.


 

9.            Logan Company made a purchase of merchandise on credit from Claude Corporation on August 3, for $6,000, terms 2/10, n/45. On August 10, Logan makes the appropriate payment to Claude. The entry on August 10 for Logan Company is

 a)    Accounts Payable   6,000    

                Merchandise Inventory                                120

                Cash                                                      5,880

 b) Accounts Payable      6,000    

                Cash                                                      6,000

 c) Accounts Payable       5,880    

                Cash                                                      5,880

 d)  Accounts Payable     6,000    

                Purchase Returns and Allowances            120

                                Cash                                                      5,880


 

10.          Net sales is sales less

a.            sales discounts.

b.            sales returns and allowances.

c.             sales discounts and sales returns and allowances.

d.            sales returns.


 

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