Accounting Chapter 23 Name and discuss the two most important internal control

76) Name and discuss the two most important internal control principles embedded in the voucher

system.

23.2 Learning Objective 23-2

1) If it is later decided to pay an approved voucher in two payments:

A) a memo in the check register must show the unpaid balance.

B) an entry in the Paid column of the voucher register must show the unpaid balance.

C) the original voucher must be canceled and two new vouchers must be issued.

D) a memo must be made on the voucher to show the unpaid balance.

2) After Crowe purchased $5,000 of merchandise from Hanks, Crowe discovered $300 of defective

merchandise. Record the entry for the return (assume the gross method). The company uses the periodic

method and the voucher system.

A)

Vouchers Payable 5,000

Vouchers Payable 4,700

Purchases Returns & Allow. 300

B)

Vouchers Payable 300

C)

Vouchers Payable 4,700

Purchases Returns & Allow. 300

Vouchers Payable 5,000

D) None of these answers is correct.

3) After Sam purchased $11,000 of merchandise from Gary, Sam discovered $1,200 of defective

merchandise. Record the entry for the return. The company uses the gross method, the periodic method

and the voucher system.

A)

Vouchers Payable 1,200

B)

Vouchers Payable 11,000

Vouchers Payable 9,800

Purchases Returns & Allow. 1,200

C)

Vouchers Payable 9,800

Purchases Returns & Allow. 1,200

Vouchers Payable 11,000

D) None of these answers is correct.

4) Alex returned all of the $6,000 purchase of equipment to James. The company uses the voucher system.

The entry to record this is:

A)

Vouchers Payable 6,000

Equipment 6,000

B)

Equipment 6,000

Vouchers Payable 6,000

C)

Equipment 6,000

Accounts Payable 6,000

D) None of these answers is correct.

5) Jack returned all of the $13,000 purchase of equipment to Sue. The company uses the voucher system.

The entry to record this is:

A)

Vouchers Payable 13,000

Equipment 13,000

B)

Equipment 13,000

Vouchers Payable 13,000

C)

Equipment 13,000

Accounts Payable 13,000

D) None of these answers is correct.

6) Emily purchased $2,000 of merchandise on April 1 and recorded it in the voucher register. On April 8,

$400 of the merchandise proved to be defective. The company uses the gross method and the periodic

inventory system. The entry would be to:

A) reduce the original voucher.

B) record a purchase return in the general journal.

C) cancel the original voucher and record a revised voucher.

D) None of these answers is correct.

7) If partial payment is made and installment payments are set up after the voucher is prepared for the

total amount owed:

A) the old voucher is cancelled and a new voucher is prepared for the new amount owed.

B) the old voucher is credited for the entire amount.

C) Vouchers Payable is debited; Purchases Returns and Allowances is credited.

D) None of these answers is correct.

8) What is the internal control advantage of using the net method of accounting for merchandise

purchases?

A) It highlights the inefficiency of losing purchase discounts.

B) It guarantees that all purchase discounts will be taken.

C) It automatically increases a firm’s net income.

D) It results in a higher quality of inventory on hand for customers.

9) The Discount Lost account is used when the:

A) gross method is used and the discount is not taken.

B) gross method is used and the discount is taken.

C) net method is used and the discount is not taken.

D) net method is used and the discount is taken.

10) The company uses the periodic inventory system and the voucher system. If the net method is

applied, the purchase of $9,000 of merchandise with terms 2/10, n/30 is recorded by:

A) debit Cash $9,000; credit Accounts Payable $9,000.

B) debit Accounts Payable $9,000; credit Purchases $9,000.

C) debit Purchases $9,000; credit Accounts Payable $9,000.

D) debit Purchases $8,820; credit Vouchers Payable $8,820.

11) The company uses the periodic inventory system and the voucher system. If the net method is

applied, the purchase of $8,000 of merchandise with terms 4/15, n/60 is recorded by:

A) debit Cash $8,000; credit Accounts Payable $8,000.

B) debit Accounts Payable $8,000; credit Purchases $8,000.

C) debit Purchases $7,680; credit Accounts Payable $7,680.

D) debit Purchases $7,680; credit Vouchers Payable $7,680.

12) Toy Bots Company bought $8,000 of merchandise, terms 2/10, n/30. The company uses the periodic

inventory system and the voucher system. The journal entry to record the transaction under the net

method would be to:

A) debit Purchases $7,840; credit Accounts Payable $7,840.

B) debit Purchases $8,000; credit Vouchers Payable $8,000.

C) debit Purchases $8,000; credit Vouchers Payable $7,840; credit Discounts Lost $160.

D) debit Purchases $7,840; credit Vouchers Payable $7,840.

13) Grant’s Hardware bought $12,000 of merchandise, terms 1/10, n/30. The company uses the periodic

inventory system and the voucher system. The journal entry to record the transaction under the net

approach method would be to:

A) debit Purchases $11,880; credit Accounts Payable $11,880.

B) debit Purchases $11,880; credit Vouchers Payable $11,880.

C) debit Purchases $12,000; credit Vouchers Payable $11,880; credit Discounts Lost $120.

D) debit Purchases $12,000; credit Cash $12,000.

14) Lynn Corporation bought $8,000 of merchandise from Woods Corporation, terms 2/10, n/30. The

company uses the periodic inventory system and the voucher system. The journal entry to record the

payment under the net method after the discount period would be to:

A) debit Vouchers Payable $8,000; credit Cash $8,000.

B) debit Vouchers Payable $8,000; credit Discounts Lost $160; credit Cash $7,840.

C) debit Vouchers Payable $7,840; credit Cash $7,840.

D) debit Vouchers Payable $7,840; debit Discounts Lost $160; credit Cash $8,000.

15) On May 1, Garcia Corporation bought $11,000 of merchandise from Morris Corporation, terms 4/10,

n/30. Garcia paid the invoice on May 6. The company uses the periodic and voucher system. The journal

entry to record the payment under the net method would be to:

A) debit Vouchers Payable $11,000; credit Cash $11,000.

B) debit Vouchers Payable $11,000; credit Discounts Lost $440; credit Cash $10,560.

C) debit Vouchers Payable $10,560; credit Cash $10,560.

D) debit Vouchers Payable $10,560; debit Discounts Lost $440; credit Cash $11,000.

16) A cash discount of $24 taken under the net method is recorded in:

A) the check register.

B) the voucher register.

C) the general journal.

D) None of these answers is correct.

17) The primary difference between the gross method and the net method of recording invoices is:

A) when the invoice is paid.

B) when the discount is recognized.

C) the gross method is only used when there are no discounts available.

D) the net method does not use a voucher system.

18) Booker’s Company purchased $6,000 of merchandise with terms of 5/10, n/60 and paid the invoice

within the discount period. Brooke uses the periodic and voucher systems. If Booker‘s uses the net

method of recording merchandise purchases, the $300 purchases discount is recorded in:

A) the voucher register.

B) the check register.

C) the general journal.

D) None of these answers is correct.

19) Booker Company purchased $8,000 of merchandise with terms of 2/10, n/60 and paid the invoice

within the discount period. The company uses the periodic inventory method and the voucher system. If

Booker’s uses the net method of recording merchandise purchases, the $160 purchases discount is:

A) recorded in the voucher register.

B) recorded in the check register.

C) recorded in the general journal.

D) not recorded unless the discount is lost after the discount date.

20) The entry to record payment of a voucher, for an invoice paid within the discount period, under the

net method will include:

A) a debit to Purchase Discounts Lost.

B) a credit to Purchase Discounts.

C) a credit to Discounts Lost.

D) None of these is correct.

21) The entry to record payment of a voucher, for an invoice after the discount period, under the net

method and the periodic inventory system will include:

A) a debit to Purchase Discounts.

B) a credit to Purchase Discounts.

C) a debit to Discounts Lost.

D) None of these is correct.

22) When there is a return after the original voucher has been prepared, the first step is to create a new

voucher for the amount owed.

23) If a purchase return or allowance occurs after the posting of the original voucher, the original voucher

is cancelled.

24) Partial payments of an original voucher require new vouchers for each approved payment.

25) The Discount Lost account is used when the gross method is used for recording invoices.

26) If an account is not paid on time using the net method, the account ________ must be recorded.

27) Any change in an already recorded voucher dictates the ________ of that voucher.

Given the following accounts:

[1] Cash in bank

[2] Petty cash

[3] Supplies

[4] Equipment

[5] Notes payable

[6] Vouchers payable

[7] FICA payable

[8] Wages payable

[9] Purchases

[10] Purchase discounts

[11] Discounts lost

[12] Repairs expense

[13] Interest expense

[14] Delivery expense

Indicate the account(s) to be debited and credited to record the following transactions.

The company uses the periodic inventory method.

28) Prepared and recorded voucher #422 for the purchase of merchandise (gross method) of $10,000 with

credit terms of 2/10, n/30.

Debit ________ Credit ________

29) Received an invoice in the amount of $60 for repairs to the store equipment, voucher #423 was

prepared.

Debit ________ Credit ________

30) Paid voucher #419 which was issued to reimburse petty cash for the purchase of supplies, $35, and

delivery expense of $50.

Debit ________ Credit ________

31) Prepared voucher #424 in the amount of $6,300 in reply to the payroll department’s request for

payment of last week‘s wages.

Debit ________ Credit ________

32) Prepared voucher #425 for a note payable. The principal amounts to $3,000 and there is $125 of

interest which has not been accrued.

Debit ________ & ________ Credit ________

33) Paid voucher #424.

Debit ________ Credit ________

34) Paid voucher #425.

Debit ________ Credit ________

35) Borrowed $4,000, signing a 5%, 60-day promissory note.

Debit ________ Credit ________

36) Paid voucher #422, payment was within the discount period.

Debit ________ Credit ________ & ________

37) Prepared and recorded voucher #426 for the purchase of merchandise (net method) of $4,200 with

credit terms of 2/10, n/30.

Debit ________ Credit ________

38) Paid voucher #426, payment was after the discount period.

Debit ________ & ________ Credit ________

For each of the following, identify in Column 1 the category to which the account belongs, in Column 2

the normal balance for the account, in Column 3 the financial statement in which the account balance is

reported, and in Column 4 the account’s nature (permanent/temporary).

39)