International Business Chapter 23 2 If a partial payment is made after the voucher is prepared

75) Separation of duties in a voucher system leads to a more effective ________ for the management of

cash payments.

76) Vouchers should be filed in the tickler file ________ rather than alphabetically.

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 $400 of defective

merchandise. Record the entry for the return (assume the gross method).

A)

Vouchers Payable

5,000

Vouchers Payable

4,600

Purchases Returns & Allow.

400

B)

Vouchers Payable

400

Vouchers Payable

400

C)

Vouchers Payable

4,600

Purchases Returns & Allow.

400

Vouchers Payable

5,000

D) None of these answers are correct.

3) After Sally purchased $3,000 of merchandise from Bob, Sally discovered $800 of defective merchandise.

Record the entry for the return.

A)

Vouchers Payable

800

Vouchers Payable

800

B)

Vouchers Payable

3,000

Vouchers Payable

2,200

Purchases Returns & Allow.

800

C)

Vouchers Payable

2,200

Purchases Returns & Allow.

800

Vouchers Payable

3,000

D) None of these answers are correct.

4) Alex returned all of the $1,000 purchase of equipment to James. The entry to record this is:

A)

Vouchers Payable

1,000

Equipment

1,000

B)

Equipment

1,000

Vouchers Payable

1,000

C)

Equipment

1,000

Accounts Payable

1,000

D) None of these answers are correct.

5) Bill returned all of the $4,700 purchase of equipment to Sue. The entry to record this is:

A)

Vouchers Payable

4,700

Equipment

4,700

B)

Equipment

4,700

Vouchers Payable

4,700

C)

Equipment

4,700

Accounts Payable

4,700

D) None of these answers are 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 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 are correct.

7) If a partial payment is made after the voucher is prepared:

A) the old voucher is cancelled and a new voucher is prepared for each installment.

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 are correct.

8) When there is a return after the original voucher has been prepared, the first step is to cancel the old

voucher.

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

is cancelled.

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

11) Spice Company completed the following transactions:

May 10 Prepared voucher #301 for purchase of merchandise for $3,600 from Sugar Company

12 Returned $500 of the merchandise purchased from Sugar because of poor quality.

Cancelled voucher #301 and replaced it with voucher #305.

Required: Prepare journal entries to record the above transactions. Assume Spice uses the gross approach

method for recording purchases. Omit explanations.

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

23.3 Learning Objective 23-3

1) 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 cash balance.

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

2) 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.

3) If the net approach method is applied, the purchase of $2,000 of merchandise with terms 2/10, n/30 is

recorded by:

A) debit Cash $2,000; credit Accounts Payable $2,000.

B) debit Accounts Payable $2,000; credit Purchases $2,000.

C) debit Purchases $2,000; credit Accounts Payable $2,000.

D) debit Purchases $1,960; credit Vouchers Payable $1,960.

4) If the net approach method is applied, the purchase of $6,500 of merchandise with terms 3/20, n/60 is

recorded by:

A) debit Cash $6,500; credit Accounts Payable $6,500.

B) debit Accounts Payable $6,500; credit Purchases $6,500.

C) debit Purchases $6,305; credit Accounts Payable $6,305.

D) debit Purchases $6,305; credit Vouchers Payable $6,305.

5) Toy Trains Company bought $5,000 of merchandise, terms 2/10, n/30. The journal entry to record the

transaction under the net approach method would be to:

A) debit Purchases $4,900; credit Accounts Payable $4,900.

B) debit Purchases $5,000; credit Vouchers Payable $5,000.

C) debit Purchases $5,000; credit Vouchers Payable $4,900; credit Discounts Lost $100.

D) debit Purchases $4,900; credit Vouchers Payable $4,900.

6) Grant’s Hardware bought $7,500 of merchandise, terms 3/10, n/30. The journal entry to record the

transaction under the net approach method would be to:

A) debit Purchases $7,275; credit Accounts Payable $7,275.

B) debit Purchases $7,275; credit Vouchers Payable $7,275.

C) debit Purchases $7,500; credit Vouchers Payable $7,275; credit Discounts Lost $225.

D) debit Purchases $7,500; credit Cash $7,500.

7) Laird Corporation bought $2,000 of merchandise from Woods Corporation, terms 2/10, n/30. The

journal entry to record the payment under the net approach method after the discount period would be

to:

A) debit Vouchers Payable $2,000; credit Cash $2,000.

B) debit Vouchers Payable $2,000; credit Discounts Lost $40; credit Cash $1,960.

C) debit Vouchers Payable $1,960; credit Cash $1,960.

D) debit Vouchers Payable $1,960; debit Discounts Lost $40; credit Cash $2,000.

8) On May 1, Garcia Corporation bought $6,000 of merchandise from Morris Corporation, terms 2/10,

n/30. Garcia paid the invoice on May 6. The journal entry to record the payment under the net approach

method would be to:

A) debit Vouchers Payable $6,000; credit Cash $6,000.

B) debit Vouchers Payable $6,000; credit Discounts Lost $120; credit Cash $5,880.

C) debit Vouchers Payable $5,880; credit Cash $5,880.

D) debit Vouchers Payable $5,880; debit Discounts Lost $120; credit Cash $6,000.

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

A) the check register.

B) the voucher register.

C) the general journal.

D) None of these answers is correct.

10) 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.

11) Brooke’s Company purchased $1,500 of merchandise with terms of 2/10, n/30 and paid the invoice

within the discount period. If Brooke’s uses the net method of recording merchandise purchases, the $30

purchases discount is recorded in:

A) the voucher register.

B) the check register.

C) the general journal.

D) None of these answers are correct.

12) Carolyn Company purchased $4,500 of merchandise with terms of 4/10, n/60 and paid the invoice

within the discount period. If Brooke’s uses the net method of recording merchandise purchases, the $180

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.

13) The entry to record payment of a voucher, for an invoice 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 are correct.

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

method will include:

A) a debit to Purchase Discounts.

B) a credit to Purchase Discounts.

C) a debit to Discounts Lost.

D) None of these are correct.

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

16) On June 2, Sandoval Corporation purchased $7,000 of merchandise from Johnston Company, terms

2/10, n/30 and prepared voucher #402. Sandoval returned $400 of the supplies on June 8, because of poor

quality. Sandoval cancelled voucher #402 and replaced it with #415.

Required: Prepare journal entries to record the above transactions. Assume Sandoval uses the net

approach method for recording purchases. Omit explanations.

17) Describe how the transactions listed would be handled applying the gross approach method and the

net approach method. For example: A $750 invoice with a 3/10 net 30 discount.

Transaction Gross Method Net Method

(a) Record original transaction

(b) Returned purchases

(c) Discounts taken

(d) Discounts not taken

18) Crane Printing purchased $5,000 of supplies from Paper Wholesale, terms 2/10, n/30 on July 25, and

prepared voucher #611. Crane paid the voucher on July 31.

Required: Prepare journal entries to record the above transactions assuming Crane uses the net approach

method for recording purchases.

19) On October 1, Oak Company purchased $12,000 of merchandise from City Seed Company, terms 2/10,

n/30, and prepared voucher #222. Cottonwood paid the invoice on October 15.

Required: Prepare journal entries to record the above transactions. Assume Oak uses the net approach

method for recording purchases.

20) Prepared and recorded voucher #422 for the purchase of merchandise (gross method) of $5,000 with

credit terms of 2/10, n/30.