Deck 8: Accounting for Purchases and Accounts Payable

Question 1

Since they are liability accounts,creditor's accounts in the accounts payable ledger normally have ____________________ balances.

Answer 1

credit

Question 2

The abbreviation P1 in the Posting Reference column of an account indicates that the data was posted from page 1 of the cash payments journal.

Answer 2

False

Question 3

The Purchases Returns and Allowances account has a normal debit balance.

Answer 3

False

Question 4

To show that the totals of the amount columns in the purchases journal were posted,the appropriate account numbers are written in parentheses below the totals.

Question 5

The entry to record the return of merchandise purchased on credit includes a debit to Accounts Payable and a credit to Purchases Returns and Allowances.

Question 6

At the end of the accounting period the total of the accounts in the accounts payable subsidiary ledgers need not agree to the total in the firm's accounts payable ledger account.

Question 7

Purchases of merchandise on credit should be recorded in the ____________________ journal.

Question 8

Freight In and Purchases Returns and Allowances are deducted from Purchases to determine the net delivered cost of purchases.

Question 9

The use of a purchases journal strengthens the audit trail.

Question 10

Each individual entry in the purchases journal is posted to the general ledger at the end of each day.

Question 11

The form sent to the supplier to order goods is called a(n)___________________.

Question 12

The supplier's invoice is the source document for a purchase on credit transaction.

Question 13

No amounts are posted from the purchases journal to the accounts payable subsidiary ledger during the month.

Question 14

When an accounts payable subsidiary ledger is used,the entry to Accounts Payable requires two posting references in the general journal.

Question 15

Whenever a sales department needs goods,it sends the purchasing department a form called a(n)___________________.

Question 16

The Freight In account should have a(n)____________________ balance.

Question 17

A purchase of merchandise for cash should be recorded in the purchases journal.

Question 18

A firm's accounts payable ledger may include accounts for creditors who are not suppliers of merchandise.

Question 19

Purchases returns and allowances are recorded in the ____________________ journal if a firm does not have a purchases returns and allowances journal.

Question 20

If an amount recorded in the general journal requires two postings,a diagonal line is used to separate the two posting references in the posting reference column.

Question 21

In a firm that uses special journals,the return of damaged merchandise to a supplier and receipt of a credit memorandum is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 22

Credit purchases of supplies that are to be used in the business are entered in

A) the purchases journal.
B) the general journal.
C) the cash payments journal.
D) the cash receipts journal.

Question 23

Good internal control requires a _____________________ of duties.

Question 24

Which of the following statements is not correct?

A) Cash purchases of merchandise are not recorded in the purchases journal.
B) A credit purchase of equipment for use in the business would be recorded in the purchases journal.
C) The Purchases account has a normal debit balance.
D) The invoice date and credit terms must be carefully recorded in the purchases journal because they determine when payment is due.

Question 25

The source document for recording a purchase of merchandise on credit is

A) the purchase order.
B) the purchase invoice.
C) the receiving report.
D) the purchase requisition.

Question 26

After a supplier of merchandise is selected,the purchasing department issues a form called

A) a purchase invoice.
B) a purchase order.
C) a sale invoice.
D) a purchase requisition.

Question 27

Which of the following statements is correct?

A) The purchase requisition is the form sent to a supplier to order goods.
B) The Purchases account is reported as an asset on the balance sheet.
C) To the customer,a supplier's invoice is a purchase order invoice.
D) The credit terms,2/10,n/30,allow the customer to take a 2 percent discount if payment is made within 10 days of the invoice,otherwise payment is due in full in 30 days.

Question 28

When an accounts payable ledger is used,the Accounts Payable account in the general ledger becomes a(n)____________________ account.

Question 29

The Purchases account is

A) a permanent account.
B) a temporary account.
C) a subsidiary account.
D) a liability account.

Question 30

In a firm that uses special journals,the purchase of merchandise with terms of 2/10,n/30 is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 31

Purchases of merchandise on credit should be recorded in

A) the purchases journal.
B) the general journal.
C) the cash payments journal.
D) the sales journal.

Question 32

An allowance received from a creditor is posted to the ____________________ column of the creditor's account.

Question 33

The entry to record a return of merchandise purchased on credit includes a debit to the ____________________ account in the general ledger.

Question 34

In a small firm,the creditor accounts are placed in ____________________ order in the accounts payable ledger.

Question 35

In a firm that uses special journals,the purchase of merchandise for $2,800,payable in 30 days,plus a freight charge of $140 is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 36

When the sales department needs goods,it sends the purchasing department a form called

A) a purchase invoice.
B) a purchase order.
C) a purchase requisition.
D) a sales invoice.

Question 37

A list of creditors and the balances owed to them is called a schedule of ___________________.

Question 38

After damaged goods are returned,the supplier issues a(n)____________________ memorandum.

Question 39

Freight charges on merchandise purchases should be debited to

A) the Purchases account.
B) the Accounts Payable account.
C) the Freight In account.
D) the creditor's account in the subsidiary ledger.

Question 40

The entry to record a purchase of merchandise on credit includes

A) a debit to Purchases and a credit to Accounts Receivable.
B) a credit to Purchases and a credit to Accounts Payable.
C) a debit to Accounts Payable and a credit to Purchases.
D) a debit to Purchases and a credit to Accounts Payable.

Question 41

Music,Inc.uses a periodic inventory system when recording its purchases and sales of inventory.If the business returns $1,000 of damaged goods to its supplier,select the correct entry to record the return:

A)

B)

C)

D)

Question 42

Hugh Snow returned merchandise to Farley Co.The entry on Hugh Snow's books to record the return of merchandise to Farley Co.would include a:

A) Debit Accounts Payable
B) Credit to Purchase Returns and Allowances
C) Debit to Account Receivable
D) Debit Sales Returns and Allowances

Question 43

Check marks next to the individual amounts in the purchases journal mean that the amounts

A) have been posted to the general ledger.
B) have been posted to the accounts payable subsidiary ledger.
C) have been posted to the accounts receivable subsidiary ledger.
D) do not need to be posted to any account.

Question 44

A creditor's account in the accounts payable ledger has a balance of $10,560 as of April 1.After a transaction of $12,800 is posted from the purchases journal and a transaction of $9,200 is posted from the cash payments journal,the balance of the creditor's account on April 30 is:

A) $9,200 debit
B) $6,960 credit
C) $14,160 credit
D) $12,800 debit

Question 45

The type of account and normal balance of Purchase Returns and Allowances is a(n)

A) contra-revenue account,credit balance.
B) asset account,debit balance.
C) contra-cost of goods sold account,credit balance.
D) expense account,credit balance.

Question 46

Tune Tones Instrument Tuning Company owes Mandy Lynn's Music Studio $4,856 as of November 1.During November Tune Tones purchased merchandise from Mandy Lynn totaling $8,495 and made payments on account to Mandy Lynn in the amount of $7,250.The amount Tune Tones owes Mandy Lynn on November 30 is:

A) $6,101
B) $3,611
C) $10,889
D) $7,250

Question 47

In a firm that uses special journals,the purchase of merchandise for cash is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 48

Postings to the accounts payable ledger should be made

A) daily.
B) weekly.
C) monthly.
D) at the end of the fiscal period.

Question 49

The journal entry to record the purchase of merchandise on account for $2,750 with freight of $125 prepaid by their supplier and added to the invoice is:

A) debit Purchases $2,750;credit Accounts Payable $2,750
B) debit Accounts Payable $2,875,debit Freight in $125;credit Purchases $2,750
C) debit Purchases $2,750,debit Freight In $125;credit Accounts Payable $2,875
D) debit Accounts Receivable $2,875;credit Sales $2,875

Question 50

Best Value Furniture uses the periodic inventory system to account for its inventory.It purchased $2,000 of goods from its supplier but later returned $400 of the goods due to damage.Best Value would record the return by:

A) debiting Accounts Payable,crediting Purchases
B) debiting Sales Returns and Allowances,crediting Accounts Receivable
C) debiting Accounts Payable,crediting Purchases Purchase Returns and Allowances
D) debiting Purchase Returns and Allowances,crediting Accounts Payable

Question 51

To record a return of merchandise purchased on credit on the books of the buyer,the accountant would

A) debit Purchases Returns and Allowances and credit Accounts Receivable.
B) debit Purchases Returns and Allowances and credit Purchases.
C) debit Accounts Payable and credit Purchases Returns and Allowances.
D) debit Purchases and credit Purchases Returns and Allowances.

Question 52

The amount of the purchases for a period is presented in

A) the balance sheet.
B) the income statement.
C) the statement of owner's equity.
D) the cost of purchases statement.

Question 53

Which of the following statements is correct?

A) Freight In is subtracted from Purchases to arrive at delivered cost of purchases.
B) Another name that may be used for the Freight In account is "Transportation In."
C) Freight charges that are listed on the invoice received from a supplier are not part of the total credit to Accounts Payable to record the credit purchase.
D) The Freight In account is subtracted from Sales to get Net Sales.

Question 54

A creditor's account in the accounts payable ledger has a $1,600 beginning balance.After a transaction for $700 is posted from the purchases journal,the balance of the creditor's account is

A) $2,300 debit.
B) $900 credit.
C) $2,300 credit.
D) $900 debit.

Question 55

Nice Guys Apparel received a $200 credit memorandum as an allowance for goods that it returned to one of its suppliers.Identify the statement below that would be correct when posting the transaction.

A) A debit of $200 would be posted to the supplier's account in the accounts payable ledger.
B) A debit of $200 would be posted to the supplier's account in the accounts receivable ledger.
C) A credit of $200 would be posted to the Accounts Receivable account in the general ledger.
D) A credit of $200 would be posted to the Purchases account in the general ledger.

Question 56

The journal entry to record the purchase on account of $900 of merchandise with freight of $65 prepaid by their supplier and added to the invoice is:

A) debit Purchases $965;credit Accounts Payable $965
B) debit Accounts Payable $965,debit Freight in $65;credit Purchases $900
C) debit Purchases $900,debit Freight In $65;credit Accounts Payable $965
D) debit Accounts Receivable $965;credit Sales $965

Question 57

A firm had purchases of $16,200,freight charges of $300,and purchases returns and allowances of $1,100 during one month.Its net delivered cost of purchases was

A) $14,800.
B) $17,600.
C) $16,200.
D) $15,400.

Question 58

Credit terms of 1/10,n/30 mean that

A) payment in full is due 10 days after date of the invoice.
B) a 1% discount may be taken for up to 30 days.
C) if the invoice is paid within 10 days of its date,a 1% discount may be taken;otherwise the total amount is due in 20 days.
D) if the invoice is paid within 10 days of its date,a 1% discount may be taken;otherwise the total amount is due in 30 days.

Question 59

In a firm that uses special journals,the receipt of a credit memorandum from a supplier for merchandise that was damaged but can be sold at a reduced price is recorded in the

A) cash payments journal.
B) cash receipts journal.
C) purchases journal.
D) general journal.

Question 60

The total of the balances in the individual creditor's accounts should agree with the balance of

A) the Purchases account in the general ledger.
B) the Accounts Receivable account in the general ledger.
C) the Accounts Payable account in the general ledger.
D) the Sales account in the general ledger.

Question 61

Bally Boutique uses a perpetual inventory system when recording its purchases and sales of inventory.The business sells $6,000 of goods to charge account customers and the goods originally cost Bally,$3000.The entry to record the sale would include:

A) a debit to Cost of Goods Sold for $3,000 and a credit to Merchandise Inventory for $3,000
B) a debit to Merchandise Inventory for $3,000 and a credit to Cost of Goods Sold for $3,000
C) a debit to Sales for $6,000 and a credit to Merchandise Inventory for $6,000
D) a debit to Accounts Receivable for $3,000 and a credit to Sales for $3,000

Question 62

For each of the transactions listed below,identify the journal that should be used to record the transaction.Use CR for cash receipts journal,CP for cash payments journal,S for sales journal,P for purchases journal,and G for general journal.

Question 63

If a perpetual inventory system is used instead of a periodic system,identify the accounts that the Merchandise Inventory account replaces.

A) Purchases,Sales,Freight In
B) Purchases,Purchase Returns and Allowances,Freight In
C) Purchases,Cost of Goods Sold
D) Purchases,Accounts Receivable,Freight In

Question 64

Which of the following accounts has a normal debit balance?

A) Purchases
B) Purchase Returns
C) Accounts Payable
D) Sales

Question 65

At the end of September 2016 and before the purchases journal was posted,selected general ledger account balances for Paper Products were as follows (each account had a normal balance): The purchases journal had the following totals: Purchases,$19,540;Freight In,$1,225;Accounts Payable,$20,765.
Calculate the ending balance of each of the three accounts after the posting from the purchases journal.Indicate whether each balance is a debit or credit.

Question 66

Skiing International uses a perpetual inventory system when recording its purchases and sales of inventory.If the business purchases $8,000 of goods on account,select the correct entry to record the purchase:

A)

B)

C)

D)

Question 67

At the end of February 2016 and before the purchases journal was posted,selected general ledger account balances for Volter Repair Services were as follows (each account had a normal balance): The purchases journal had the following totals: Purchases,$28,000;Freight In,$1,000;Accounts Payable,$29,000.
Calculate the ending balance of each of the three accounts after the posting from the purchases journal.Indicate whether each balance is a debit or credit.

Question 68

For each of the transactions listed below,identify the journal that should be used to record the transaction.Use CR for cash receipts journal,CP for cash payments journal,S for sales journal,P for purchases journal,and G for general journal.

Question 69

For good internal control of purchases,businesses should do all of the following

A) Computations on the invoice should be checked for accuracy.
B) Another person should write the check for payment of the invoice.
C) Goods should be carefully checked when received.
D) Ensure that the same person is involved in the process of buying,receiving and paying for the goods.

Question 70

If the perpetual inventory system is used to record the purchase and sale of goods,the account used to record shipping charges is the

A) purchases account.
B) merchandise inventory account.
C) transportation in account.
D) freight in account.

Question 71

The Fast Frame Shop had the following transactions for the month of January 201.Record the transactions on page 7 of a purchases journal and page 9 of a general journal.Total,prove,and rule the purchases journal as of January 31.

Question 72

The Picture Perfect Camera Shop had the following transactions for the month of August 2016.Record the transactions on page 7 of a purchases journal and page 9 of a general journal.Total,prove,and rule the purchases journal as of August 31.

Question 73

Read the description of the following transactions that are recorded during the accounting period for Drummond Consulting Services.Determine the account to be debited and the account to be credited.

A)Purchased merchandise with terms of net 30 days.
B)Returned some damaged merchandise to a supplier and received a credit memorandum.
C)Issued a check to a supplier as a payment on account.
D)Received an allowance for some merchandise that was slightly damaged but can be sold at a reduced price.Received a credit memorandum.
E)Purchased merchandise with terms of 2/10,n/30.The supplier's invoice includes a freight charge.

Question 74

Explain each of the following credit terms.

A)n/30
B)n/10 EOM
C)2/10,n/30
D)1/10,n/20
E)3/5,n/30

Question 75

One of the supplier accounts from the accounts payable ledger for Paragon Video is shown below.Explain each of the entries that have been posted to this supplier's subsidiary ledger account.

Question 76

The purchases journal for Carothers Company is shown below.Describe how the amounts would be posted to the general ledger accounts.

Question 77

The purchases journal for Wright Company is shown below.Describe how the amounts would be posted to the general ledger accounts.

Question 78

Read the description of the following transactions that are recorded during the accounting period for Hughley Consulting Services.Determine the account to be debited and the account to be credited.

A)Issued a check to a supplier as a payment on account.
B)Purchased merchandise;the supplier's invoice,which includes a freight charge,has payment terms of 2/10,n/30.
C)Returned some damaged merchandise to a supplier and received a credit memorandum.
D)Received an allowance for some merchandise that was slightly damaged but can be sold at a reduced price;received a credit memorandum.
E)Purchased merchandise with terms of net 30 days.

Question 79

If a business pays $1,100 on account to a creditor,the effect of the payment is a decrease to cash and a(n)

A) decrease to Fees Income.
B) increase of capital.
C) increase to accounts receivable.
D) decrease to accounts payable.

Question 80

During March a firm purchased $22,650 of merchandise and paid freight charges of $1,720.If the net delivered cost of purchases for the March is $21,900,what is the total purchase returns for March?

A) $0
B) $2,470
C) $970
D) $3,440