Deck 10: Purchases and Cash Payments

Question 1

When merchandise is bought for resale,which of the following accounts would be increased?

A)Store Equipment
B)Purchases
C)A/R
D)Supplies Expense

Answer 1

B

Question 2

Purchases Discount:

A)is a contra-cost account.
B)has a normal debit balance.
C)decreases Net Income.
D)All of the above are correct.

Answer 2

A

Question 3

A debit memorandum decreases which account on the buyer's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Sales Discount

Answer 3

A

Question 4

When the term F.O.B.shipping point is used,title passes:

A)when goods reach the halfway point.
B)when goods reach the destination.
C)when goods are shipped.
D)when the buyer signs for the product.

Question 5

A debit memorandum increases which account on the seller's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Discount
D)Accounts Receivable

Question 6

Jack's Online Service on April 30 has the following account balances:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 25,000 \\\hline \text { Sales Returns and Allowances } & 5,000 \\\hline \text { Purchases } & ? ? ? \\\hline \text { Freight-In } & 1,000 \\\hline \text { Purchases Returns and Allow. } & 2,000 \\\hline \text { Purchases Discounts } & 1,500 \\\hline\end{array}$$
If net purchases for the period are $15,000,what is the amount of gross purchases?

A)$18,500
B)$15,500
C)$17,500
D)$16,500

Question 7

If a display rack was purchased for the store,which of the following accounts would be increased?

A)Store Equipment
B)Purchases
C)Capital
D)None of the above is correct.

Question 8

Which of the following accounts is a contra-cost account?

A)Accumulated Depreciation
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Depreciation Expense

Question 9

Jack's Online Service on April 30 has the following account balances:
$$\begin{array} { | l | r | } \hline \text { Sales } & \$ 25,000 \\\hline \text { Sales Returns and Allowances } & 5,000 \\\hline \text { Purchases } & 14,000 \\\hline \text { Freight-In } & 1,000 \\\hline \text { Purchases Returns and Allow. } & 2,000 \\\hline \text { Purchases Discounts } & 1,400 \\\hline\end{array}$$
Net purchases for the period are:

A)$10,600.
B)$9,600.
C)$12,600.
D)$14,000.

Question 10

Tyler returned $500 of merchandise within the discount period.The entry to record the return is to:

A)debit Purchases for $500;credit Accounts Payable for $500.
B)debit Purchases for $500;credit Purchases Returns and Allowances for $500.
C)debit Accounts Payable/Suppliers Name for $500;credit Purchases Returns and Allowances for $500.
D)debit to Accounts Payable for $500;credit Purchases Discount for $500.

Question 11

Jack's Online Service on April 30 has the following account balances:
$$\begin{array} {| l | r| } \hline\text { Sales } & \$ 25,000 \\\hline \text { Sales Returns and Allowances } & 5,000 \\\hline \text { Purchases } & 20,000 \\\hline \text { Freight-In } & 1,000 \\\hline \text { Purchases Returns and Allow. } & 2,000 \\\hline \text { Purchases Discounts } & ? ? ? \\\hline\end{array}$$
If net purchases for the period are $15,000,what is the amount in the Purchases Discounts account?

A)$3,000
B)$4,000
C)$2,000
D)$1,000

Question 12

The normal balance for Purchases Returns and Allowances is:

A)a debit.
B)a credit.
C)zero.
D)It does not have a normal balance.

Question 13

Shoes 'R Us bought some new shoes for its fashion line and is required to pay the freight costs.The freight terms are:

A)F)O.B.destination.
B)F)O.B.shipping point.
C)3/10,n/30.
D)B and C are correct.

Question 14

A debit memorandum increases which account on the buyer's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Discount
D)Accounts Receivable

Question 15

When merchandise is bought for resale,which of the following accounts would be decreased?

A)Store Equipment
B)Purchases
C)Cash
D)Capital

Question 16

A cost account is treated the same as:

A)an asset.
B)a contra-asset.
C)a revenue.
D)an expense.

Question 17

A debit memorandum decreases which account on the seller's books?

A)Accounts Payable
B)Purchases Returns and Allowances
C)Sales Returns and Allowances
D)Accounts Receivable

Question 18

Net purchases are:

A)Purchases + Purchases Returns and Allowances.
B)Purchases - Purchases Discount - Purchases Returns and Allowances.
C)Purchases - Freight - Purchases Returns and Allowances.
D)Purchases + Freight-in + freight-out.

Question 19

A characteristic of Purchases Returns and Allowances is:

A)it has a normal credit balance.
B)it increases when merchandise is returned.
C)it decreases cost.
D)All of the above are correct.

Question 20

Purchases is a(n):

A)cost.
B)asset.
C)liability.
D)contra-asset.

Question 21

Purchases Returns and Allowances:

A)decrease net income.
B)increase net income.
C)increase accounts payable.
D)Not enough information provided.

Question 22

The freight paid on goods purchased F.O.B.Shipping Point was not recorded.This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total liabilities to be overstated.

Question 23

A purchase discount correctly taken was debited to Purchases at the time the entry was recorded.This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total assets to be overstated.

Question 24

The entry to record a purchase of $5,000 on account,terms of 2/10,n/30,would include a:

A)debit to Purchases Discount for $100.
B)credit to Accounts Payable for $5,000.
C)debit to Accounts Payable for $5,000.
D)credit to Cash for $5,000.

Question 25

Purchases discounts:

A)decrease net income.
B)increase net income.
C)increase accounts payable.
D)Not enough information provided.

Question 26

Office Supplies (not used for resale)bought on account were returned for credit and recorded with a debit to Accounts Payable and a credit to Purchase Returns and Allowances.This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total assets to be understated.

Question 27

Before paying an invoice,the accounting department must check:

A)the purchase order.
B)the invoice.
C)the receiving report.
D)All of the above are correct.

Question 28

Which of the following transactions will cause a liability to be credited and a cost account to be debited when the periodic inventory system is in use?

A)Recorded the adjustment for depreciation
B)Recorded the adjustment for the consumption of supplies
C)Purchased merchandise inventory on account
D)Purchased office supplies on account

Question 29

A characteristic of Purchases is:

A)it has a debit normal balance.
B)it increases net income.
C)that it is used to record the purchase of merchandise to be resold.
D)A and C are correct.

Question 30

Purchased office supplies on account.This will be recorded with:

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

Question 31

Purchases:

A)decrease net income.
B)increase net income.
C)have no effect on net income.
D)increase capital.

Question 32

A form used in business to place an order for the buying of goods from a seller is:

A)purchase requisition.
B)purchase order.
C)purchase demand.
D)purchases returns.

Question 33

Purchase Discounts are taken on:

A)shipping expense.
B)Purchases Returns and Allowances.
C)Purchases.
D)All of the above except B

Question 34

Which of the following transactions will cause one asset to be debited and another to be credited when the periodic inventory system is in use?

A)Purchased merchandise on account
B)Purchased merchandise for cash
C)Purchased office supplies for cash
D)Returned merchandise inventory for credit

Question 35

The return of merchandise was recorded as a debit to Accounts Receivable and a credit to Purchases Returns and Allowances.This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)total liabilities to be understated.
D)total assets to be overstated.

Question 36

The term F.O.B.means:

A)free on board.
B)freight or bill.
C)freight order billing.
D)fee on bill.

Question 37

F.O.B.shipping point means:

A)the buyer pays for the freight.
B)the seller pays for the freight.
C)the title passes at time of shipment.
D)Both A and C are correct.

Question 38

A purchase discount was recorded as a credit to the Purchases account and a debit to Accounts Payable.This error will cause:

A)net income to be overstated.
B)net income to be understated.
C)net income to not be affected.
D)total liabilities to be overstated.

Question 39

A form used with a business by the requesting department asking the purchasing department to buy specific goods is called a:

A)purchase order.
B)purchase requisition.
C)credit memorandum.
D)debit memorandum.

Question 40

On November 30,Janoch's Dog Kennel purchased $600 of merchandise on account from the Ganster Company.The goods were shipped F.O.B.shipping point.The freight charge of $40 was paid by Ganster Company and added to the invoice.The amount to record in the Purchases account is:

A)$600.
B)$640.
C)$560.
D)$550.

Question 41

A receiving report is used to notify the company of the quantity and condition of the goods received.

Question 42

When the terms are F.O.B.shipping point,the buyer is responsible for the cost of shipping from the seller's shipping point to the purchaser's location but the title does not pass until it is delivered.

Question 43

J&L Lumber reports Purchases of $66,000.If Purchases Returns and Allowances are $6,000 and Purchases Discounts are $1,500,what are the net Purchases?

A)$54,000
B)$52,500
C)$67,500
D)$58,500

Question 44

To prove the subsidiary ledger agrees with the Accounts Payable controlling account balance,complete a:

A)debit memorandum.
B)schedule of accounts payable.
C)purchase order.
D)schedule of accounts receivable.

Question 45

Hardware Restoration had net purchases of $55,000.If Purchases Returns and Allowances are $10,000 and Purchases Discounts are $1,500,what are gross purchases?

A)$38,500
B)$55,000
C)$66,500
D)$40,000

Question 46

An entry to record the payment to a vendor was correctly recorded and posted to the general ledger but was not posted to the subsidiary ledger.This error will cause:

A)net income to be overstated.
B)the vendor account total in the subsidiary to be less than control total.
C)the accounts payable control account to not agree with the subsidiary ledger.
D)the accounts receivable control account to not agree with the subsidiary ledger.

Question 47

The term used when the seller is responsible for the cost of freight is:

A)F)O.B.shipping point.
B)F)O.B.destination.
C)Freight-In.
D)Purchases.

Question 48

On February 12,Clare purchased $400 of merchandise on account from Larsen's Accessories,terms 2/10,n/30.The goods were shipped F.O.B.destination.The freight charge was $40.The amount to be recorded in the Accounts Payable Subsidiary ledger is:

A)$392.
B)$408.
C)$400.
D)$440.

Question 49

An invoice approval form is used by accounting to check the invoice before approving it for payment.

Question 50

Joyce's Accessories bought 60 necklaces for $10 each on account.The invoice included a 5% sales tax and payment terms of 2/10,n/30.In addition,5 necklaces were returned prior to payment.The entry to record the purchase would include:

A)a debit to Accounts Payable for $530.
B)a debit to Accounts Payable for $500.
C)a debit to Purchases for $630.
D)a debit to Purchases for $500.

Question 51

Payment for merchandise made before approval is given.

Question 52

Explain the difference between F.O.B.shipping point and F.O.B.destination.

Question 53

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

Question 54

Purchases Discounts are not taken on the purchased merchandise plus freight.

Question 55

The seller's sales invoice is the buyer's purchase invoice.

Question 56

The account Freight-In accumulates the shipping costs to the seller.

Question 57

Purchase discounts are given to the buyer from the supplier for early payment on account.

Question 58

The term used when the purchaser is responsible for the cost of freight is:

A)F)O.B.shipping point.
B)F)O.B.destination.
C)Freight-In.
D)Purchases.

Question 59

On October 6,Mark purchased merchandise for his electric store.The invoice was for $35,000 plus freight of $750,terms 1/15,n/30.The freight was included on the invoice.On October 10,Mark returned merchandise for $5,000 credit.On October 19,Mark paid the amount owed.Fill in the blanks below.
a)The credit to Accounts Payable on October 6 is ________.
b)The debit to Freight-In on October 6 is ________.
c)The debit to Accounts Payable on October 10 is ________.
d)The credit to Purchases Discount on October 19 is ________.
e)The credit to Cash on October 19 is ________.

Question 60

The Purchases Discount account normally has a debit balance and is a contra-cost account.

Question 61

Returned merchandise paid for within the discount period for a Cash refund.This will be recorded with:

A)a credit to a liability.
B)a credit to an asset.
C)a debit to a liability.
D)a debit to an asset.

Question 62

The entry to record returned merchandise to Vine Company is:

A)debit Purchases Returns and Allowances;credit Accounts Receivable in the general ledger.
B)debit Accounts Payable;credit Purchases.
C)debit Accounts Payable/Vans Company in the accounts payable subsidiary ledger and debit Accounts Payable in the general ledger;credit Purchases Returns and Allowances.
D)debit Purchases;credit Accounts Payable.

Question 63

The Schedule of Accounts Payable is listed alphabetically.

Question 64

The accounts payable subsidiary ledger should equal the control account in the general ledger.

Question 65

Which account is the controlling account for the amounts owed to individual creditors?

A)Accounts Payable in the general ledger
B)Accounts Receivable in the general ledger
C)Accounts Receivable in the subsidiary ledger
D)Accounts Payable in the subsidiary ledger

Question 66

Individual amounts are recorded during the month to the accounts payable ledger.

Question 67

Returned merchandise under the periodic inventory method.This will be recorded with:

A)a debit to Accounts Payable and a credit to Purchases Returns and Allowances.
B)a debit to Merchandise Inventory and a credit to Cash.
C)a credit to Accounts Payable and a debit to Merchandise Inventory.
D)a debit to Accounts Payable and a credit to Merchandise Inventory.

Question 68

Jenny's Accessories bought 50 necklaces for $10 each on account.The invoice included a 2% sales tax and payment terms of 2/10,n/30.In addition,5 necklaces were returned prior to payment.The entry to record the return would include:

A)a debit to Accounts Payable for $50.00.
B)a debit to Accounts Payable for $51.00.
C)a debit to Purchases Returns and Allowances for $50.00.
D)a debit to Purchases Returns and Allowances for $51.00.

Question 69

The Accounts Receivable and Accounts Payable are both controlling accounts.

Question 70

The entry to record a payment on a $650 account within the 2% discount period would include a:

A)debit to Accounts Payable for $637.
B)debit to Accounts Payable for $650.
C)credit to Purchases for $637.
D)debit to Cash for $650.

Question 71

If a debit memorandum is issued,the buyer will reduce their accounts receivable.

Question 72

The buyer issues a debit memorandum to indicate that a previous purchase amount is being reduced because goods were returned or an allowance was requested.

Question 73

A list of creditors with balances owed is called:

A)a schedule of accounts receivable.
B)a schedule of accounts payable.
C)a list of suppliers.
D)a trade list.

Question 74

Jemco bought goods for $300 on credit.Jemco returned $50 worth of goods.Terms of the sale were 2/10,n/30.If Jemco pays the amount owed within the discount period,what is the amount they should pay?

A)$300
B)$255
C)$245
D)$250

Question 75

The accounts payable subsidiary ledger:

A)lists accounts alphabetically.
B)lists accounts for which the company owes money.
C)has a controlling account in the general ledger.
D)All of the above are correct.

Question 76

A Schedule of Accounts Payable is a list of customer accounts that owe the company money.

Question 77

A list showing the ending balances owed to individual creditors is called a Schedule of Accounts Payable.

Question 78

Jackson purchased $500 of goods and received credit terms of 2/10,n/30.How much did he pay if payment was made during the discount period?

A)$450
B)$510
C)$500
D)$490

Question 79

The controlling account is found in the subsidiary ledger for all accounts payable.

Question 80

Heidi's Accessories bought 50 necklaces for $10 each on account.The invoice included a 6% sales tax and payment terms of 2/10,n/30.In addition,5 necklaces were returned prior to payment.The entry to record the payment (within the discount period)would include:

A)a credit to Cash for $477.
B)a credit to Cash for $468.
C)a credit to Accounts Receivable for $477.
D)a credit to Accounts Receivable for $468.