loader  Loading... Please wait...

Question(s) / Instruction(s):

59. Stine Company purchased merchandise with an invoice price of $2,000 and credit terms of 1/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms? a. 6% b. 12% c. 18% d. 36%

60. 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 discount period and recognize a savings. c. pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill. 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.

61. Sales revenues are usually considered earned when a. cash is received from credit sales. b. an order is received. c. goods have been transferred from the seller to the buyer. d. adjusting entries are made.

62. A sales invoice is a source document that a. provides support for goods purchased for resale. b. provides evidence of incurred operating expenses. c. provides evidence of credit sales. d. serves only as a customer receipt.

63. Sales revenue a. may be recorded before cash is collected. b. will always equal cash collections in a month. c. only results from credit sales. d. is only recorded after cash is collected.

64. The journal entry to record a credit sale is a. Cash Sales b. Cash Service Revenue c. Accounts Receivable Service Revenue d. Accounts Receivable Sales

65. A credit memorandum is prepared when a. an employee does a good job. b. goods are sold on credit. c. goods that were sold on credit are returned. d. customers refuse to pay their accounts.

66. The Sales Returns and Allowances account is classified as a(n) a. asset account. b. contra asset account. c. expense account. d. contra revenue account.

67. A credit memorandum is used as documentation for a journal entry that requires a debit to a. Sales and a credit to Cash. b. Sales Returns and Allowances and a credit to Accounts Receivable. c. Accounts Receivable and a credit to a contra-revenue account. d. Cash and a credit to Sales Returns and Allowances.

68. If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales a. discount. b. return. c. contra asset. d. allowance.

69. When goods are returned that relate to a prior cash sale, a. the Sales Returns and Allowances account should not be used. b. the cash account will be credited. c. Sales Returns and Allowances will be credited. d. Accounts Receivable will be credited.

70. The Sales Returns and Allowances account does not provide information to management about a. possible inferior merchandise. b. the percentage of credit sales versus cash sales. c. inefficiencies in filling orders. d. errors in overbilling customers.

71. A Sales Returns and Allowances account is not debited if a customer a. returns defective merchandise. b. receives a credit for merchandise of inferior quality. c. utilizes a prompt payment incentive. d. returns goods that are not in accordance with specifications.

72. As an incentive for customers to pay their accounts promptly, a business may offer its customers a. a sales discount. b. free delivery. c. a sales allowance. d. a sales return.

73. The credit terms offered to a customer by a business firm were 2/10, n/30, which means that a. the customer must pay the bill within 10 days. b. the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date. c. the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date. d. two sales returns can be made within 10 days of the invoice date and no returns thereafter.

74. A sales discount does not a. provide the purchaser with a cash saving. b. reduce the amount of cash received from a credit sale. c. increase a contra-revenue account. d. increase an operating expense account.

75. Company A sells $600 of merchandise on account to Company B with credit terms of 2/10, n/30. If Company B remits a check taking advantage of the discount offered, what is the amount of Company B's check? a. $420. b. $588. c. $540. d. $480.

76. Hale Company sells merchandise on account for $3,000 to Karr Company with credit terms of 2/10, n/30. Karr Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? a. $2,940. b. $2,950. c. $2,500. d. $2,450.

77. Dryer Company sells merchandise on account for $2,100 to Unruh Company with credit terms of 2/10, n/30. Unruh Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Dryer Company make upon receipt of the check? a. Cash 1,500 Accounts Receivable 1,500

b. Cash 1,470 Sales Returns and Allowances 630 Accounts Receivable . 2,100

c. Cash 1,470 Sales Returns and Allowances 600 Sales Discounts 30 Accounts Receivable 2,100

d. Cash 2,058 Sales Discounts 42 Sales Returns and Allowances 600 Accounts Receivable 1,500

78. Which of the following would not be classified as a contra account? a. Sales b. Sales Returns and Allowances c. Accumulated Depreciation d. Sales Discounts

Find Similar Answers by Subject


Student Reviews

Rate and review your solution! (Please rate on a Scale of 1 - 5. Top Rating is 5.)


Expert's Answer
Download Solution:
$4.00

This solution includes:

  • Plain text
  • Cited sources when necessary
  • Attached file(s)
  • Solution Document(s)



Reach Us

408-538-8534

20-3582-4059

39-008-4233

+1-408-904-6494