Question

6. The journal entry to record a cash sale for a merchandising business is

a.         Cash

                        Sales

b.         Cash

                 Fees earned

c.          Accounts Receivable

                        Sales Returns and Allowances

d.         Accounts Receivable

                        Sales Revenue

7. On January 15, Nifty Company sells merchandise on account to Martinez Associates for $20,000 with terms 2/10, n/30. On January 20, Martinez returns merchandise worth $4,000 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?

a.         $15,600

b.         $15,680

c.          $16,000

d.         None of the above

8. Which of the following companies would be most likely to use a perpetual inventory system?

a.         Grain company

b.         Beauty salon

c.          Car dealership

d.         Yogurt franchise

9. Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct?

a.         Returns of merchandise by Adams Company to a manufacturer are credited to Inventory.

b.         Freight paid to get merchandise to Adams Company’s store is debited to Freight Expense.

c.          A return of merchandise by one of Adams Company’s customers is credited to Inventory.

d.         Discounts taken by Adams Company’s customers are credited to Inventory

10. Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account?

a.         Freight Expense

b.         Freight-In

c.          Merchandise Inventory

d.         Freight-Out

Answer 1

6) Cash account.......................Debit

To sales account.............Credit

7) Cash received on January 24 will be

[$20,000 - $4000] * 98% = $15,680

$15,680

8) Car dealership companies use Perpetual Inventory system, where as others use periodic inventory

9) Returns of merchandise by Adams company to a manufacturer are credited to Inventory.

Option 'A' is correct

10) Under Perpetual Inventory system, Cash freight costs incurred for the buyer for the transportation of goods is recorded in Merchandise Inventory account.