10) A company sold merchandise with a cost of $207 for $370 on account. The seller uses the perpetual
inventory system. The entry to record the cost of merchandise sold would include ________.
A) a debit to Sales Revenue and a credit to Cash for $370
B) a debit to Cash and a credit to Sales Revenue for $370
C) a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $207
D) a debit to Merchandise Inventory for $207 and a credit to Cost of Goods Sold for $207
11) Journalize the following transaction for a merchandiser that uses the perpetual inventory system.
Sold goods to A. Pitt, on account, $2,500 (cost, $1,750). Omit explanations.
12) A reduction in the amount of revenue earned on sales for early payment is known as a sales discount.
13) Using the gross method for recording sales, sales are recorded at the amount of the sale less any sales
discounts.
14) Using the gross method for recording sales, if a customer pays within the discount period, the seller
records the discount as a decrease in Sales Revenue.
15) A merchandiser using the gross method sold goods on account to Customer A for $8,000 with terms
of 2/10, n/30. If the payment is received within the discount period, Accounts Receivable is decreased by
$7,800.
16) The Sales Discounts account __________.
A) is a contra Sales Revenue account
B) represents additional sales revenue
C) is a balance sheet account
D) represents the discount lost when a customer does not pay within the discount period
17) Landon Jewelers uses the perpetual inventory system. On April 2, Landon sold merchandise with a
cost of $1,300 for $6,400 to a customer on account with terms of 1/15, n/30. The journal entry to record the
cost of goods sold would be:
A)
Cost of Goods Sold
1,300
Accounts Receivable
1,300
B)
Sales Revenue
1,300
Cost of Goods Sold
1,300
C)
Cost of Goods Sold
1,300
Merchandise Inventory
1,300
D)
Merchandise Inventory
1,300
Cost of Goods Sold
1,300
18) Forever Jewelers uses the gross method and a perpetual inventory system. On April 2, Forever sold
merchandise with a cost of $1,400 for $5,400 to a customer on account with terms of 1/15, n/30. Which of
the following journal entries correctly records the sales revenue?
A)
Sales Revenue
5,346
Accounts Receivable
5,346
B)
Sales Revenue
5,400
Cost of Goods Sold
5,400
C)
Accounts Receivable
5,346
Sales Revenue
5,346
D)
Accounts Receivable
5,400
Sales Revenue
5,400
19) On November 1, 2018, A & C Janitorial Supply sold merchandise on account with a cost of $4,200 for
$6,000 and payment terms of 3/10, n/30. The company uses the gross method and a perpetual inventory
system. Prepare the journal entries for this transaction. Omit explanations.
Accounts Receivable
6,000
Sales Revenue
6,000
Merchandise Inventory
4,200
20) Journalize the following transactions for a merchandiser that uses the gross method for recording
sales and a perpetual inventory system.
On January 8, inventory was sold for $7,000 on account. Credit terms were 2/15, n/30 (cost $5,500). On
January 31, cash was received in full settlement of the January 8 sale. Omit explanations.
21) Journalize the following transactions for Park Gift Shop. Explanations are not required. Park uses the
gross method for sales transactions and a perpetual inventory system.
Mar. 5: Purchased $4,400 of merchandise inventory on account, 3/10, n/EOM and FOB shipping point.
Mar. 9: Returned $700 of defective merchandise purchased on March 5.
Mar. 11: Paid the freight bill of $250 on the March 5 purchase.
Mar. 12: Sold merchandise inventory on account for $5,200., 2/15, n/30. These goods cost the company
$3,700.
Mar. 14: Paid amount owed on credit purchase of March 5, less the return and the discount.
Mar. 30: Received cash from the March 12 customer in full settlement of the debt.
22) Forever Jewelers uses the gross method and a perpetual inventory system. On April 2, Forever sold
merchandise with a cost of $1,700 for $5,600 to a customer on account with terms of 2/15, n/30. Which of
the following would be included in the journal entry to record the cash receipt on April 10?
A) Credit to Cash for $5,488
B) Credit to Sales Discounts for $112
C) Debit to Cash for $5,600
D) Debit to Sales Discounts for $112
23) Forever Jewelers uses the gross method and a perpetual inventory system. On April 2, Forever sold
merchandise with a cost of $1,900 for $6,300 to a customer on account with terms of 1/15, n/30. Which of
the following would be included in the journal entry to record the cash receipt on April 30?
A) Credit to Cash for $6,237
B) Credit to Sales Discounts for $63
C) Debit to Cash for $6,300
D) Debit to Sales Discounts for $63
24) Regarding the new revenue recognition standards, which of the following statement is correct?
A) The gross method should be used only if the seller does not expect to collect from the customer within
the discount period
B) Under the gross method, Sales Discounts Forfeited is credited when customers do not pay within the
discount period.
C) Under the net method, Sales Discounts are debited when customers pay within the discount period.
D) The gross method should be used if the seller expects to collect from the customer within the discount
period.