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5.2 Learning Objective 5-2
1) An invoice is a request for payment from the purchaser.
2) An invoice is also known as a bill.
3) An invoice can be either a sales invoice or a purchase invoice.
4) An invoice ________.
A) is the bill that the purchaser receives from the vendor
B) is the purchaser's request for payment from the seller
C) is a demand for immediate payment
D) must be paid within 10 days from the date of the invoice
5) List four items from an invoice that are needed to record a purchase of merchandise inventory.
6) The Merchandise Inventory account is an expense account that is used only for goods purchased that
the business owns and intends to resell to customers.
7) The Merchandise Inventory account is an asset account that is used only for goods purchased that the
business owns and intends to resell to customers.
8) The Merchandise Inventory account is an expense account that is used for goods purchased that the
business owns and intends to resell to customers, as well as for purchases of office supplies and
equipment.
9) Which of the following entries would be made to record the purchase of inventory on account, if a
company uses the perpetual inventory system?
A) a debit to Purchases and a credit to Accounts Payable
B) a debit to Accounts Payable and a credit to Purchases
C) a debit to Merchandise Inventory and a credit to Accounts Payable
D) a debit to Accounts Payable and a credit to Merchandise Inventory
10) When a company uses the perpetual inventory system, ________.
A) purchases of Office Supplies and Equipment that will be used in the day-to-day operations of the
business are recorded as debits to Merchandise Inventory.
B) the purchase of merchandise inventory on account is recorded as a debit to Accounts Payable and a
credit to Merchandise Inventory.
C) the Merchandise Inventory account is reported as an expense on the income statement.
D) the Merchandise Inventory account is debited for purchases of goods that the company intends to
resell to customers.
11) A company using the perpetual inventory system purchased merchandise on account for $5,000. Give
the journal entry to record this transaction. Omit explanation.
12) A purchase discount is the amount offered to the purchaser for delaying the payment to the seller.
13) Credit terms of a merchandising company are 1/15, net 40. This means that the buyer can receive a
discount of 1% if the invoice is paid within 40 days of the invoice date.
14) Centennial, Inc. sold goods on credit terms n/20 to Harper, Inc. This means no discounts are offered,
and the amount of the invoice is due 20 days after the invoice date.
15) The purchase discount amount is calculated on the amount of the invoice minus the returns and
allowances.
16) Purchase discounts are calculated on the amount of the merchandise purchased including freight
costs.
17) Under the perpetual inventory system, when a purchaser makes payment within the discount period,
the amount of discount will be credited to the Merchandise Inventory account.
18) Credit terms of 2/10, n/30 indicate that a discount of 2% will be given if payment is made within 10
days of the invoice date. Otherwise, the total invoice amount is due within 30 days of the invoice date.
19) What does "2/10" mean, with respect to "credit terms of 2/10, n/30"?
A) A discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date.
B) Interest of 2 percent will be charged if the invoice is paid after 10 days from the date on the invoice.
C) A discount of 10 percent will be allowed if the invoice is paid within two days of the invoice date.
D) Interest of 10 percent will be charged if invoice is paid after two days.
20) A company that uses the perpetual inventory system purchases inventory for $62,000 on account,
with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within
10 days?
A) a debit to Accounts Payable for $62,000, a credit to Cash for $1,240, and a credit to Merchandise
Inventory for $60,760
B) a debit to Accounts Payable for $62,000, a credit to Merchandise Inventory for $1,240, and a credit to
Cash for $60,760
C) a debit to Merchandise Inventory for $1,240, a debit to Accounts Payable for $62,000, and a credit to
Cash for $63,240
D) a debit to Accounts Payable for $60,760, a debit to Merchandise Inventory for $1,240, and a credit to
Cash for $62,000
21) A company that uses the perpetual inventory system purchased inventory for $970,000 on account
with terms of 3/7, n/20. Which of the following correctly records the payment made 15 days after the date
of invoice?
A)
Cash
970,000
Accounts Payable
970,000
B)
Accounts Payable
970,000
Merchandise Inventory
970,000
C)
Accounts Payable
970,000
Cash
970,000
D)
Accounts Payable
970,000
Merchandise Inventory
29,100
Cash
940,900
22) The terms of an invoice are 3/10, n/25. This means that a ________ of the invoice date.
A) discount of 10 percent is allowed if the invoice is paid within three days after the invoice date
B) discount of 3 percent is allowed if the invoice is paid within 10 days after the invoice date
C) discount of 25 percent is allowed if the invoice is paid within 10 days after the invoice date
D) discount of 3 percent is allowed if the invoice is paid after 25 days after the invoice date
23) An invoice of $600 for merchandise purchased is showing 2/15, n/30 as terms of credit. If the invoice is
paid on or before the fifteenth day after the invoice date, the amount to be paid is ________.
A) $588
B) $600
C) $612
D) $615
24) An invoice, with payment terms of 2/10, n/30, was issued on April 28 for $250.00. If the payment was
made on May 12, the amount of payment will be ________. (Round your answer to the nearest cent.)
A) $250.00
B) $225.00
C) $245.00
D) $248.00
25) Under the perpetual inventory system, discounts taken on an invoice by the buyer would be
________.
A) debited to Merchandise Inventory
B) credited to Merchandise Inventory
C) debited to Cost of Goods Sold
D) credited to Cost of Goods Sold
26) A company purchased inventory for $2,200 on account, and recorded the following journal entry:
Merchandise Inventory
2,200
Accounts Payable
2,200
The vendor's invoice showed terms of 3/10, n/30. Prepare the journal entry for the purchaser for the
payment of the invoice 17 days after the invoice date. Omit explanation.
28) Defective, damaged, or otherwise unsuitable merchandise that is returned to the seller is referred to as
purchase allowances by the purchaser.
29) If purchase allowances are granted, the buyer need not return the goods to the seller.
30) Under the perpetual inventory system, purchase returns or allowances are debited to the Merchandise
Inventory account by the purchaser.
31) On January 21, 2019, Cressent, Inc. received merchandise from Neptune, Inc. On that date, Cressent
found a few of these goods to be damaged. On January 22, Cressent returned the damaged goods to the
seller. Such returns will be treated as ________ by Cressent.
A) purchase returns
B) sales returns
C) purchase allowances
D) sales allowances
32) Under the perpetual inventory system, when a wholesaler returns the goods purchased on account,
the ________ account is credited.
A) Accounts Receivable
B) Merchandise Inventory
C) Cost of Goods Sold
D) Accounts Payable
33) A company that uses a perpetual inventory system purchased inventory on account and later
returned goods worth $100 to the vendor. Which of the following would be the correct journal entry to
record these returns?
A)
Purchase Returns
100
Accounts Payable
100
B)
Accounts Payable
100
Purchase Returns
100
C)
Merchandise Inventory
100
Accounts Payable
100
D)
Accounts Payable
100
Merchandise Inventory
100
