41. On June 3, Maryland Company purchased merchandize worth $800 on credit, terms 2/10, n/30. The
amount paid on June 15. What is the required journal entry to record the payment under the periodic
inventory system?
a.
Accounts Payable 784
Purchases Discounts 16
Cash 800
b.
Accounts Payable 800
Purchases Discounts 16
Cash 784
c.
Cash 800
Accounts Payable 800
d.
Accounts Payable 800
Cash 800
42. Use this information to answer the following question.
Chupka Company experienced the following events during the period:
1.
A tabulation of invoices at the end of the day showed $800 in MasterCard invoices,
which were deposited in a bank account at full value less a 5 percent discount.
2.
Made a sale on American Express card for $400 and mailed invoice to American
Express for payment. The discount charged by American Express is 4 percent.
The entry to record transaction 1 would include an increase in
a.
Credit Card Expense for $40.
b.
Sales for $760.
c.
Cash for $800.
d.
Accounts Receivable for $760.
43. Use this information to answer the following question.
Chupka Company experienced the following events during the period:
1.
A tabulation of invoices at the end of the day showed $800 in MasterCard
invoices, which were deposited in a bank account at full value less a 5 percent
discount.
2.
Made a sale on American Express card for $400 and mailed invoice to American
Express for payment. The discount charged by American Express is 4 percent.
The entry to record transaction 2 would include a(n)
a.
increase in Accounts Receivable for $400.
b.
increase in Sales for $400.
c.
decrease in Credit Card Expense for $16.
d.
decrease in Cash for $384.
44. A retailer accepted Visa charge sales totaling $500 and deposited the charge slips in the bank.
Assuming a credit card discount expense of 4 percent, what would be the increase to Cash and the
increase to Sales, respectively?
a.
$500 and $480
b.
$480 and $500
c.
$480 and $480
d.
$500 and $500
45. Which of the following is not a primary concern of internal control?
a.
Efficiency of company operations
b.
Fairness of financial statements
c.
Accuracy of accounting records
d.
Safeguarding assets
46. All of the following are examples of internal control activities except
a.
rotation of key personnel.
b.
company picnics for all employees.
c.
bank reconciliations.
d.
insistence that employees take earned vacations.
47. A traditional definition of internal control specifically includes all of the following features except
a.
adherence to prescribed managerial policies.
b.
promotion of operational efficiency.
c.
reliability of accounting data.
d.
maintenance of a clean and safe workplace.
48. Each of the following is a feature of internal control except
a.
sound personnel policies.
b.
recording of all transactions.
c.
separation of duties.
d.
television commercials to enhance marketability.
49. Each of the following is a feature of internal control except
a.
limited access to assets.
b.
periodic independent verification.
c.
management compensation packages.
d.
authorization of transactions.
50. Which of the following attributes of internal control would be violated if the accounting clerk wrote
checks to pay accounts payable?
a.
Adequate design of documents
b.
Sound personnel procedures
c.
Periodic independent verification
d.
Separation of duties
51. The bonding of employees is an example of which feature of a good system of internal control?
a.
Authorization of transactions
b.
Limited access to assets
c.
Sound personnel policies
d.
Separation of duties
52. Which of the following would not be found in a good system of internal control?
a.
Establishing a system of checks and balances
b.
Having one person handle all the responsibilities of a department
c.
Establishing an internal audit staff
d.
Requiring all employees to take earned vacations
53. A consequence of a separation of duties is that
a.
operations become extremely inefficient because of constant training of employees.
b.
theft by employees becomes impossible.
c.
more employees will need to be bonded.
d.
theft is possible only when several employees are involved.
54. A very small company would have the most difficulty in implementing which of the following internal
control activities?
a.
Separation of duties
b.
Periodic independent verification
c.
Limited access to assets
d.
Sound personnel procedures
55. Internal control is weakened by all of the following except
a.
collusion.
b.
separation of duties.
c.
effects of changing conditions.
d.
human error.
56. In a small business, because it is often cost-prohibitive to hire extra employees, the lack of certain
separations of duties can best be overcome by
a.
hiring only honest employees.
b.
bonding the employees.
c.
holding one person responsible for a given set of transactions.
d.
getting the owner actively involved.
57. Which of the following is not an internal control activity for cash?
a.
Surprise audits of cash on hand should be made occasionally.
b.
All cash receipts should be recorded promptly.
c.
The number of persons who have access to cash should be limited.
d.
Most transactions should be in cash to reduce recordkeeping.
58. Which of the following documents is sent to the vendor (seller) of goods?
a.
Purchase requisition
b.
Purchase order
c.
Receiving report
d.
Invoice
59. In a purchase system, the most appropriate department to control goods upon arrival into the company
is the
a.
receiving department.
b.
treasury department.
c.
accounting department.
d.
requesting department.
60. The document prepared by a department requesting the company to buy something is called a(n)
a.
invoice.
b.
purchase requisition.
c.
receiving report.
d.
purchase order.
61. A remittance advice is attached to a(n)
a.
check.
b.
invoice.
c.
purchase order.
d.
receiving report.
62. Which of the following sets of documents are in the correct sequence?
a.
Purchase order, check, receiving report
b.
Purchase requisition, receiving report, purchase order
c.
Purchase order, purchase requisition, invoice
d.
Purchase requisition, purchase order, invoice
63. All of the following are the goals of internal controls over merchandising transactions except
a.
To keep credit losses at a minimum
b.
To retain enough cash to take advantage of cash discounts
c.
To keep the appropriate amount of inventory on hand
d.
To decide on the quality of materials to be purchased
64. Which of the following is not an internal control activity for cash?
a.
Employees who have access to cash should be bonded.
b.
Recordkeeping and physical custody of cash should be performed by the same person.
c.
The amount of cash on hand should be kept to a minimum.
d.
Banking facilities should be used as much as possible.
65. When payment is received by mail, a detailed list of such receipts would not be retained by the
a.
person who opens the mail.
b.
accounting department.
c.
receiving department.
d.
cashier.
66. A purchase order is sent from a company’s
a.
requesting department to the supplier.
b.
treasurer to the supplier.
c.
requesting department to its accounting department.
d.
purchasing department to the supplier.
67. Before a check authorization is issued, the following documents must be in agreement, except for the
a.
invoice.
b.
remittance advice.
c.
purchase order.
d.
receiving report.
68. Which of the following documents is prepared by to a company’s accounting department?
a.
Receiving report
b.
Check authorization
c.
Bank statement
d.
Invoice
69. When a company makes payment for goods or services, the check is prepared by the company’s
a.
requesting department.
b.
treasurer.
c.
accounting department.
d.
receiving department.
70. Which of the following documents would not originate with the purchasing company?
a.
Purchase order
b.
Check
c.
Receiving report
d.
Invoice
71. Which of the following documents would be sent to the treasurer?
a.
Invoice
b.
Purchase order
c.
Check authorization
d.
Bank statement
72. Which of the following is an appropriate internal control activity for cash?
a.
The amount of cash on hand should be kept to a maximum.
b.
All payments should be made with currency, not checks.
c.
Banking facilities should be used as little as possible.
d.
Recordkeeping and custodianship over cash should be performed by separate individuals.
73. Which of the following is not a goal of a system of internal control over merchandising transactions?
a.
Prevent the theft of cash and inventory.
b.
Keep enough cash on hand to take advantage of purchase discounts.
c.
Keep the maximum amount of inventory on hand at all times.
d.
Keep credit losses as low as possible.
74. Which of the following documents would be prepared (by a buyer of goods) after the others?
a.
Receiving report
b.
Check
c.
Purchase requisition
d.
Purchase order
75. Which of the following documents remains within the originating company in a purchase transaction?
a.
Purchase order
b.
Purchase requisition
c.
Check
d.
Invoice
76. The entry to record a purchase of $6,000 in merchandise assuming terms of 2/10, n/30 and a periodic
inventory system would include a(n)
a.
increase to Accounts Payable for $6,000.
b.
increase to Purchases Discounts for $120.
c.
decrease to Purchases for $6,000.
d.
decrease to Accounts Payable for $5,880.
77. The entry to record a $750 sale with terms of 2/10, n/30 would include a(n)
a.
decrease to Accounts Receivable for $750.
b.
increase to Sales for $750.
c.
increase to Sales Discounts for $15.
d.
decrease to Sales for $735.
78. The collection of a $400 account within the 2 percent discount period would result in a(n)
a.
increase to Accounts Receivable for $392.
b.
decrease to Cash for $392.
c.
increase to Sales Discounts for $8.
d.
decrease to Accounts Receivable for $392.
79. The collection of a $1,000 account beyond the 2 percent discount period would result in a(n)
a.
increase to Cash for $980.
b.
decrease to Accounts Receivable for $1,000.
c.
decrease to Cash for $1,000.
d.
increase to Sales Discounts for $20.
80. Goods totaling $28,000 purchased February 2 on terms of 2/10, n/30 and on which returns of $1,000
were made on February 10 would be subject to which of the following discounts if paid for on
February 12?
a.
$540
b.
$560
c.
$580
d.
$20
81. The entry to record payment of a $1,500 purchase within the 2 percent discount period would include
a(n)
a.
decrease to Accounts Payable for $1,470.
b.
increase to Purchases Discounts for $30.
c.
increase to Accounts Payable for $1,500.
d.
increase to Cash for $1,500.
82. A purchase on account with an invoice price of $750 has been made. The entry to record the payment
after the 2 percent discount period would include a(n)
a.
decrease to Accounts Payable for $750.
b.
decrease to Purchases Discounts for $15.
c.
increase to Accounts Payable for $735.
d.
decrease to Cash for $735.
SHORT ANSWER
1. For a company that takes an average of 50 days to sell inventory, takes an average of 110 days to
collect for its sales, and has payment terms of 45 days on its purchases, what is the financing period?
Show calculations.
2. Under a perpetual inventory system, is it necessary to take a physical inventory at the end of the
period? Why or why not?
3. Assume that on July 24, 20xx, Bond Company had a sale totaling $11,019 with a related cost of goods
sold of $7,604. Record this transaction in journal form assuming the perpetual inventory system was in
use.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
July 24
Accounts Receivable
Sales
Cost of Goods Sold
Merchandise Inventory
7,604
Add: Time for collection
Less: Time until payment
4. Sandy’s Supply Store, Inc., entered into the transactions listed below. In the journal provided, prepare
Sandy’s entries, assuming use of the perpetual inventory system. Omit explanations.
Mar.
2
Purchased $900 of merchandise on credit, terms n/30.
6
Returned $150 of the items purchased on March 2.
8
Paid freight charges of $50 on the items purchased March 2.
16
Sold merchandise on credit for $1,200, terms n/15. The merchandise had a cost
in inventory of $750.
17
Of the merchandise sold on March 16, $100 of it was returned. The items had
cost Sandy’s $30.
25
Received payment in full from the customer of March 16.
31
Paid for the merchandise purchased on March 2.
General Journal
Page 1
Date
Description
Post.
Ref.
Debit
Credit
Credit
5. Given the following information, prepare in good form the cost of goods sold section of an income
statement for 2010.
Freight-In
$ 8,000
Merchandise Inventory, December 31, 2009
30,000
Merchandise Inventory, December 31, 2010
32,000
Purchases
76,000
Purchases Returns and Allowances
3,600
Purchases
Less purchases returns and allowances
Net purchases
Freight-in
Net cost of purchases
Goods available for sale
Cost of goods sold
6. Given the following information, prepare in good form the cost of goods sold section of an income
statement for 2010.
Freight-In
$ 24,000
Merchandise Inventory, December 31, 2009
90,000
Merchandise Inventory, December 31, 2010
102,000
Cost of Goods Sold
Purchases
228,000
Purchases Returns and Allowances
8,400
7. From the following data, calculate the amount of gross margin and gross purchases.
Ending Merchandise Inventory
$ 128
Purchases Returns and Allowances
32
Beginning Merchandise Inventory
160
Sales
1,280
Freight-In
96
Cost of Goods Sold
778
Purchases Discounts
16
8. Compute the dollar amount of each item indicated by a letter in the following table. Treat each
horizontal row of numbers as a separate problem.
Sales
Beginning
Merchandise
Inventory
Net Cost
of
Purchases
Ending
Merchandise
Inventory
Cost of
Goods
Sold
Gross
Margin
Operating
Expenses
Net
Income
(Loss)
$125,000
$ a
.
$ 35,000
$10,000
$ b
.
$40,000
$ c
.
$12,000
d
12,000
e
18,000
108,000
60,000
40,000
20,000
230,000
22,000
167,000
f
g
50,000
h
(1,000)
390,000
40,000
i
60,000
j
k
120,000
40,000
a. $60,000
g. $180,000
c. $28,000
i. $250,000
Purchases
Net purchases
Freight-in
24,000
Net cost of purchases
Goods available for sale
$333,600
31, 2010
Cost of goods sold
$231,600
9. Using the following information, calculate for 2010 (a) net sales, (b) cost of goods sold, (c) gross
margin, and (d) net income.
Freight-In
$ 11,400
Merchandise Inventory, December 31, 2009
130,000
Sales
320,000
Purchases Returns and Allowances
1,600
Advertising Expense
18,000
Purchases
140,000
Merchandise Inventory, December 31, 2010
110,000
Sales Returns and Allowances
11,000
General and Administrative Expenses
114,000
a. $309,000
c. $139,200
b. $169,800
d. $7,200
10. Assuming the use of the periodic inventory system, use the data below to calculate the net cost of
purchases and the goods available for sale for the year ended December 31, 2010.
Merchandise Inventory, December 31, 2009
$2,307
Merchandise Inventory, December 31, 2010
2,041
Cost of Goods Sold
7,604
11. Assuming the use of the periodic inventory system, use the data below to calculate the net cost of
purchases and the goods available for sale for the year ended December 31, 2010.
Merchandise Inventory, December 31, 2009
$ 2,830
d. $168,000
j. $230,000
e. $114,000
k. $160,000
f. $9,000
Merchandise Inventory, December 31, 2010
3,482
Cost of Goods Sold
18,048
12. Assume that the $5,509 sales made by Exotic Corporation for the month ended December 31, 20xx,
were made to customers using credit cards. Prepare one journal entry to record these sales assuming
that all of the credit card companies charge Exotic a 2 percent discount fee. (Omit date.) Round to the
nearest whole dollar.
General Journal
Date
Description
Post.
Ref.
Debit
Credit
Debit
Cash
Credit Card Expense
Sales