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Chapter 4
82. Sometimes a(n) _____ is offered to buyers as a means of encouraging them to pay before the end of the credit period.
a.
accounts receivable
b.
credit card
c.
sales discount
d.
cash sale
83. On January 1, a company made a sale of $87,500, on credit. If the credit terms were 2/10, n/30, what would be the
amount of the sales discount be if the payment is received on January 9?
a.
$26,250
b.
$8,750
c.
$10,000
d.
$1750
Chapter 4
84. A sales invoice included the following information: merchandise price, $6,000; terms 2/10, n/eom. Assuming that a
credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount
period, what is the amount of cash received by the seller?
a.
$5,880
b.
$5,292
c.
$5,586
d.
$5,592
85. A sales invoice included the following information: merchandise price, $8,000; terms 2/10, n/eom. Assuming that a
credit for merchandise returned of $1,000 is granted prior to payment, and that the invoice is paid within the discount
period, what is the amount of cash received by the seller?
a.
$6,840
b.
$7,000
c.
$6,860
d.
$7,840
Chapter 4
86. Merchandise subject to the credit terms 2/10, n/30, FOB shipping point, is sold to a customer on account for $20,125.
The seller issued a credit memorandum for $4,600 prior to payment. What is the amount of the cash discount allowable if
the payment is made within 10 days of the invoice date?
a.
$201.25
b.
$248.75
c.
$310.50
d.
$402.50
87. If Johnson, Inc. sold $800,000 worth of merchandise, had $100,000 returned, and then the balance paid during the 1%
discount period, how much was Johnson's net sales?
a.
$700,000
b.
$800,000
c.
$693,000
d.
$692,000
Chapter 4
88. Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated,
and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the transaction is
recorded in the seller's accounts on November 15. If the credit terms are 1/10, n/30, the discount period begins with what
date?
a.
November 12
b.
November 15
c.
November 17
d.
November 22
89. If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a:
a.
sales invoice.
b.
purchase invoice.
c.
credit memorandum.
Chapter 4
d.
debit memorandum.
90. When merchandise that was sold on account is returned, which accounts are affected?
a.
Cash, accounts receivable, cost of goods sold, and customer refunds payable
b.
Customer refunds payable, accounts receivable, merchandise inventory, and estimated returns inventory
c.
Customer refunds payable, accounts receivable, purchases, and estimated returns inventory
d.
Customer refunds payable, accounts receivable, purchases, and merchandise inventory
91. Silver Co. sold merchandise to Copper Co. on account, $75,000, terms 2/10, net 30. The cost of the merchandise sold
is $55,000. Silver Co. issued a credit memorandum for $10,000 for merchandise returned that originally cost $9,000.
Copper Co. paid the invoice within the discount period. What is amount of net sales from the transactions?
Chapter 4
a.
$65,000
b.
$63,500
c.
$64,680
d.
$63,700
92. Orange Co. sells merchandise on credit to Zea Co. in the amount of $9,000. The invoice is dated on September 15
with terms of 1/15, net 45. What is the amount of the discount, and up to what date must the invoice be paid in order for
the buyer to take advantage of the discount?
a.
$180, September 30
b.
$180, September 25
c.
$90, September 30
d.
$90, September 25
Chapter 4
93. For the perpetual inventory system, which of the following effects does not occur upon the return from a customer of
merchandise sold on account?
a.
Increases Customer Refunds and Allowances and decreases Accounts Receivable
b.
Decreases Cost of Merchandise Sold and increases Merchandise Inventory
c.
Increases Purchase Returns and Allowances and decreases Merchandise Inventory
d.
All of these occur.
94. Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $35,000. The seller
issued a credit memorandum for $8,000 prior to payment. What is the amount of the cash discount allowable?
a.
$700
b.
$540
c.
$860
d.
$350
Chapter 4
95. Net sales is calculated by _____.
a.
subtracting cost of goods sold from total sales
b.
subtracting customer refunds from total sales
c.
adding ending inventory to total sales
d.
adding cost of goods sold to total sales
96. In recording the cost of merchandise sold for cash using a perpetual inventory system, the effect on the accounts is:
a.
increase Cost of Merchandise Sold; increase Cash.
b.
increase Cost of Merchandise Sold; decrease Merchandise Inventory.
c.
increase Merchandise Inventory; decrease Cost of Merchandise Sold.
d.
increase Accounts Receivable; decrease Merchandise Inventory.
Chapter 4
97. Zilova Inc. issues a credit memo of $850 to a customer. What is the effect of this transaction on profitability and
liquidity?
a.
Both profitability and liquidity increase.
b.
Profitability increases while liquidity decreases.
c.
Both profitability and liquidity remain unchanged.
d.
Profitability decreases while liquidity increases.
98. Which of the following occurs when a seller pays a customer a refund?
a.
The seller decreases the balance of the cash account and the customer refunds payable account.
b.
The seller decreases the balance of the sales account and the accounts receivable account.
c.
The seller increases the balance of the cash account and the customer refunds payable account.
d.
The seller increases the balance of the sales account and the accounts receivable account.
Chapter 4
99. In case of merchandise return, the inventory account is increased by the amount of cost of the goods returned, and:
a.
the customer refunds payable account is increased by the same amount.
b.
the estimated returns inventory account is decreased by the same amount.
c.
the accounts receivable account is increased by the same amount.
d.
retained earnings are decreased by the same amount.
100. Gold Co. sold merchandise to Bronze Co. on account, $23,000, terms 2/15, net 45. The cost of the merchandise sold
is $18,500. Gold Co. issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900. Bronze
Co. paid the invoice within the discount period. What is the amount of net income earned by Gold Co. on the
transactions?
Chapter 4
101. Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):
a.
decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales.
b.
increase in Cash, increase in Credit Card Expense, and increase in Sales.
c.
increase in Cash, decrease in Credit Card Expense, and increase in Sales.
d.
decrease in Sales, increase in Credit Card Expense, and decrease in Cash.
102. Which of the following accounts is a contra account to Sales?
a.
Accounts Payable
b.
Sales Returns and Allowances
c.
Accounts Receivable
d.
Interest Revenue
Chapter 4
103. A sales invoice included the following information: merchandise price, $4,500; transportation, $300; terms 1/10,
n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $600 is granted prior to payment, that the
transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the amount of cash
received by the seller?
a.
$3,861
b.
$4,158
c.
$4,161
d.
$4,200
104. Data Inc. buys merchandise worth $275 on account, terms FOB shipping point, and pays the freight cost of $35. As a
result of this transaction, Data's:
a.
liquidity increases.
b.
profitability remains unchanged.
c.
liquidity decreases.
d.
profitability increases.
Chapter 4
105. Which term indicates that merchandise is free of transportation charges to the buyer?
a.
FOB destination
b.
Transportation out
c.
FOB shipping point
d.
Transportation in
106. If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as:
a.
FOB shipping point.
b.
FOB destination.
c.
FOB n/30.
d.
FOB buyer.
Chapter 4
107. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are:
a.
n/30.
b.
FOB shipping point.
c.
FOB destination.
d.
consigned.
108. If title to merchandise purchases passes to the buyer when the goods are delivered to the buyer, the terms are:
a.
consigned.
b.
n/30.
c.
FOB shipping point.
d.
FOB destination.
Chapter 4
109. The amount of the total cash paid to the seller for merchandise purchased would normally include:
a.
only the list price.
b.
only the sales tax.
c.
the list price plus the sales tax.
d.
the list price less the sales tax.
110. If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as:
a.
FOB shipping point.
b.
FOB destination.
c.
FOB n/30.
d.
FOB seller.
Chapter 4
111. As a result of inventory shrinkage:
a.
the working capital increases, whereas the gross profit percent decreases.
b.
the working capital decreases, whereas the gross profit percent increases.
c.
the working capital as well as the gross profit percent decreases.
d.
the working capital as well as the gross profit percent increases.
112. When a retailing business is making estimates for the expected customer refunds and allowances, it decreases the
customer refunds payable account:
a.
and the sales account.
b.
and the purchases account.
c.
and the accounts receivable account.
Chapter 4
d.
and the operating expenses.
113. Which of the following best explains inventory shrinkage under the perpetual inventory system?
a.
It is the discount taken by the buyer for early payment of an invoice.
b.
It is the damaged merchandise returned by the buyer to the seller.
c.
It is the amount that is entered on a cash register and recorded in the accounts by increasing inventory.
d.
It is the difference between the physical count of inventory and the balance of the inventory account.
114. Which of the following items is subtracted from sales to arrive at net sales?
a.
Desired sales
b.
Sales commission
Chapter 4
c.
Customer refunds and allowances
d.
Cost of after sales services
115. Scada Co's beginning inventory for the year was $52,500, purchases during the year were $135,750, and ending
inventory for the year was $175,000. What is Scada's cost of goods sold for the year?
a.
$17,500
b.
$52,500
c.
$91,750
d.
$13,250
116. Subtracting operating expenses from gross profit gives us ____.
Chapter 4
a.
net sales
b.
total purchases
c.
income from operations
d.
cost of goods sold
117. Which of the following is an example of an administrative expense?
a.
Cost of goods sold
b.
Office supplies expense
c.
Loss from disposing of fixed assets
d.
Advertising expense
Chapter 4
118. Which of the following is a selling expense?
a.
Advertising expense
b.
Cost of goods sold
c.
Rent expense
d.
Depreciation of land and building
119. During the previous year, Nightwork Co's.net sales was$135,000, cost of goods sold was $60,750, operating
expenses were $81,000, and other revenues were $13,550. What was Nightwork's gross profit?
a.
$74,250
b.
$60,700
c.
$(6,750)
d.
$6800
