College Accounting, 14e (Slater)
Chapter 9 Sales and Cash Receipts
9.1 Learning Objective 9-1
1) Merchants who buy goods from wholesalers for resale to customers are:
A) merchandisers.
B) retailers.
C) service companies.
D) None of the above is correct.
2) Merchandise is:
A) the same as inventory.
B) an asset.
C) the same as supplies.
D) Both A and B are correct.
3) Gross sales equals:
A) net sales minus sales discount.
B) sales discount less net income.
C) the total of cash sales and credit sales.
D) supplies minus inventory.
4) A contra-revenue account with a debit balance for returned goods is called:
A) Sales Returns and Allowances.
B) Sales Discount.
C) Prepaid Returns.
D) the discount period.
5) A characteristic of Sales Returns and Allowances is that:
A) it has a credit balance.
B) it tracks returns from customers.
C) it is a contra-revenue account.
D) B and C are correct.
6) The time frame when customers are allowed to pay their bills and still be eligible for a discount is the:
A) credit period.
B) discount period.
C) short period.
D) allowance period.
7) The length of time the customer is allowed to repay the bill is the:
A) discount period.
B) short period.
C) credit period.
D) return period.
8) Reduction given to company customers for early payment is a:
A) sales returns and allowance.
B) purchase discount.
C) sales discount.
D) customer discount.
9) A characteristic of the account, Sales Discount, includes the following:
A) debit balance.
B) contra-revenue account.
C) records the cash discounts granted to customers.
D) All of these answers are correct.
10) Credit terms of 3/15, n/30 mean that:
A) a 3% discount is allowed if the bill is paid within between 15 and 30 days.
B) a 3% discount is allowed if the bill is paid within 30 days.
C) a 3% discount is allowed if the bill is paid before the 15th day of the following month.
D) a 3% discount is allowed if the customer pays the bill within 15 days, or the entry amount is due
within 30 days.
11) Net sales equal:
A) gross sales.
B) gross sales – sales returns and allowances.
C) gross sales – sales returns and allowances – sales discounts.
D) gross sales – gross profit.
12) Sales Tax Payable is a:
A) liability account with a debit balance.
B) liability account with a credit balance.
C) contra-asset account with a debit balance.
D) contra-asset account with a credit balance.
13) The liability account used to record sales tax owed is:
A) Sales Tax Expense.
B) Prepaid Taxes.
C) Sales Tax Payable.
D) Sales Returns and Allowances.
14) The normal balance of the Sales Returns and Allowances account is:
A) a credit.
B) a debit.
C) zero.
D) It does not have a normal balance.
15) The side that increases the balance of the Sales Discount account is:
A) a credit.
B) a debit.
C) zero.
D) It does not have a normal balance.
16) Home Restoration reports net sales of $70,000. If sales returns and allowances are $13,000 and sales
discounts are $2,500, what are gross sales?
A) $70,000
B) $85,500
C) $80,500
D) $54,500
17) B&B Lumber reports gross sales of $120,000. If sales returns and allowances are $11,000 and sales
discounts are $2,500, what are the net sales?
A) $122,500
B) $111,500
C) $106,500
D) $109,000
18) Betsy’s pottery sold 300 tiles at $40 each to a charge customer, terms 1/10, n/30. Which entry is
required to record this transaction? (Round intermediary calculations to the nearest cent and final
answers to the whole dollar.)
A) Debit Cash $12,000; credit Tile Sales $12,000
B) Debit Accounts Payable $11,880; credit Tile Sales $11,880
C) Debit Accounts Receivable $11,880; debit Sales Discount $120; credit Tile Sales $12,000
D) Debit Accounts Receivable $12,000; credit Tile Sales $12,000
19) Dora’s Blankets and Bedding had a sale of $600 to a charge customer, terms 2/15, n/30. Dora should
record this transaction as follows: (Round intermediary calculations to the nearest cent and final answers
to the whole dollar.)
A) debit Accounts Receivable $600; credit Sales $600.
B) debit Cash $600; credit Sales $600.
C) debit Accounts Receivable $588; debit Sales Discounts $12; credit Sales $600.
D) debit Sales $600; credit Accounts Receivable $600.
20) Santa Materials sold goods for $3,200 plus 5% sales tax to a charge customer, terms n/30. Which entry
is required to record this transaction?
A) Debit Accounts Receivable $3,360; credit Sales Tax Payable $160; credit Sales $3,200
B) Debit Cash $3,200; credit Sales $3,200
C) Debit Accounts Receivable $3,200; credit Sales $3,200
D) Debit Accounts Receivable $3,360; credit Sales $3,360
21) Secret Trails received payment in full within the credit period for horse boarding for $1,300 plus 4%
sales tax. Terms of the sale were 3/10, n/30. Which entry is required to record this? (Round intermediary
calculations to the nearest cent and final answers to the whole dollar.)
A) Debit Cash, $1,300; credit Sales, $1,300
B) Debit Cash, $1,313; debit Sales Discount $39; credit Accounts Receivable, $1,352
C) Debit Cash, $1,352; credit Sales, $1,352
D) Debit Cash, $1,313; credit Sales, $1,313
22) H.R. Camping sold goods for $200 to a charge customer. The customer returned for credit $100 worth
of goods. Which entry is required to record the return transaction?
A) Debit Sales Returns and Allowances $100 credit Accounts Receivable $100
B) Debit Sales Returns and Allowances $100; credit Sales $100
C) Debit Sales $100; credit Sales Returns and Allowances $100
D) Debit Accounts Receivable $100; credit Sales Returns and Allowances $100
23) Monica’s Closet received payment in full within the discount period for goods sold on a $1,000 sales
invoice, terms 2/10, n/30. Which entry records this payment? (Round your calculations to the nearest
whole dollar.)
A) Debit Accounts Receivable $1,000; credit Sales $1,000
B) Debit Cash $1,000; credit Accounts Receivable $1,000
C) Debit Cash $980, debit Sales Discount $20; credit Sales $1,000
D) Debit Cash $980, debit Sales Discount $20; credit Accounts Receivable $1,000
24) Bob sold goods for $500 to a charge customer. The customer returned for credit $35 worth of goods.
Terms of the sale were 2/10, n/30. If the customer pays the amount owed within the discount period, what
is the amount the customer should pay? (Round your calculations to the nearest whole dollar.)
A) $456
B) $465
C) $500
D) $450
25) Mike returned $300 of merchandise to Secret Trails. His original purchase was $600, with terms 1/10,
n/30. If Mike pays the balance of his account after the discount period, how much should he pay? (Round
your calculations to the nearest whole dollar.)
A) $306
B) $294
C) $300
D) $600
26) The arrangements between buyer and seller as to when payments for merchandise are to be made are
called:
A) credit terms.
B) net allowance.
C) cash on demand.
D) discount period.
27) The contra-revenue accounts include:
A) Sales Tax Payable.
B) Sales Returns and Allowances.
C) Sales Discount.
D) Both B and C are correct.
28) A sales discount correctly taken by the charge customer was debited to Sales at the time the entry was
recorded. This error will cause:
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the sales discount account to be understated.
D) the net sales account for the period to be overstated.
29) Merchandise sold on credit was returned for credit and recorded with a debit to Sales Returns and
Allowances and a credit to Accounts Payable. This error will cause:
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the assets to be overstated.
D) the accounts payable to be understated.
30) The document indicating to the customer that the seller is reducing the amount owed by the customer
is a:
A) credit memorandum.
B) sales discount.
C) customer allowance.
D) debit memorandum.
31) Sold merchandise on account would be recorded with:
A) a debit to an asset account.
B) a debit to a liability account.
C) a debit to Capital.
D) None of these is correct.
32) Customer returned merchandise for credit. This will be recorded with:
A) a debit to an asset account.
B) a debit to a revenue account.
C) a credit to an asset account.
D) a debit to a liability.
33) A wholesale customer returned merchandise having already paid for it within the cash discount
period. The return will be recorded with:
A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Capital.
D) None of these is correct.
34) The total of all cash sales and credit sales equals:
A) net sales.
B) gross sales.
C) accounts receivable.
D) accounts payable.
35) Sales discounts are NOT taken on which of the following?
A) Sales Tax
B) Freight
C) Merchandise returned
D) Sales Discounts are not taken on any of the above.
36) Sara’s Jewelry sold 40 necklaces for $35 each to a credit customer. The invoice included a 7% sales tax
and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to
record the original sale would include: (Round any intermediate calculations to the nearest cent, and your
final answer to the nearest dollar.)
A) a debit to Accounts Receivable for $1,498.
B) a debit to Accounts Receivable for $1,400.
C) a debit to Sales for $1,498.
D) a debit to Sales for $1,400.
37) Mel’s Art studio was moving and sold furniture that was no longer needed for cash. The entry would
include:
A) a credit to Sales.
B) a debit to Sales.
C) a credit to Furniture.
D) a credit to Cash.
38) The normal balance of Sales Tax Payable is a debit.
39) Net Sales equals Gross Sales – Sales Returns and Allowances – Accounts Receivable.
40) If management wanted to determine if customers were returning goods at a higher rate than usual, it
could use the Sales Discounts account to analyze the information.
41) The time a customer is granted to pay the bill is the discount period.
42) Sales tax collected by the seller is not included in the seller’s total revenue.
43) Terms of 3/10, n/30 means that a customer is allowed a 3% discount if he or she pays before the 10th
day of the month following the sale.
44) Sales Returns and Allowances is a contra-sales account.
45) Sales is a revenue account.
46) Sales Discounts is a liability account.
47) If a customer returns merchandise, the income for that period will be increased.
48) The Sales Returns and Allowances account is a revenue account.
49) Sales Tax Payable represents an asset on the books of the seller.
50) Sales Discounts and Sales Returns and Allowances are contra–asset accounts.
51) When a customer returns defective office supplies, the Sales Returns and Allowances account will be
debited.
52) Use the following information to answer the question below:
Sales $76,000
Sales Discount 2,000
Sales Returns and Allowances 500
Transportation Expense 700
The Net Sales are ________.
53) Determine the amount of net sales given:
gross sales = $250,000
sales discounts = $40,000
sales returns and allowances = $35,000
$ ________
54) If cash flow is so important to merchandisers, why do they extend credit to their customers?
55) Calculate gross sales:
net sales = $100,000
sales returns and allowances = $25,000
sales discounts = $30,000
accounts receivable = $12,000
56) Explain why the account Sales Tax Payable is credited when a sale is made subject to a sales tax?
57) Compare and discuss a discount period versus a credit period.
58)
Column 1 Column 2 Column 3
Store Rent Expense
59)
Column 1 Column 2 Column 3
Sales
60)
Column 1 Column 2 Column 3
Professional Fees Earned
61)
Column 1 Column 2 Column 3
Sales Returns and Allowances
62)
Column 1 Column 2 Column 3
Maintenance Expense
63)
Column 1 Column 2 Column 3
Sales Discounts
64)
Column 1 Column 2 Column 3
Sales Tax Payable
65)
Column 1 Column 2 Column 3
Owner’s Capital
66)
Column 1 Column 2 Column 3
Shop Supplies
9.2 Learning Objective 9-2
1) If a credit memorandum is issued, what account will be increased on the seller’s books?
A) Accounts Receivable
B) Sales
C) Sales Discount
D) Sales Returns and Allowances
2) A record showing the activity and the balances owed by each customer is called the:
A) accounts payable journal.
B) sales journal.
C) bank journal.
D) accounts receivable subsidiary ledger.
3) Accounts of a single type are kept in the:
A) supplemental ledger.
B) primary ledger.
C) subsidiary ledger.
D) None of these answers is correct.
4) Which of the following statements about subsidiary ledgers is most accurate?
A) The subsidiary ledger accounts will never equal the control account in the general ledger.
B) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for
Accounts Receivable.
C) The subsidiary ledger accounts will equal the amount of cash sales.
D) All of these answers are correct.
5) When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the:
A) primary account.
B) subsidiary account.
C) receivable account.
D) controlling account.
6) Recording to the accounts receivable subsidiary ledger is done:
A) daily.
B) monthly.
C) weekly.
D) annually.
7) Every controlling account must have its own:
A) primary ledger.
B) general ledger.
C) subsidiary ledger.
D) general journal.