Deck 9: Sales and Cash Receipts

Question 1

B&B Lumber reports gross sales of $120,000. If sales returns and allowances are $11,000 and sales discounts are $2,500, what are the net sales?

A) $122,500
B) $111,500
C) $106,500
D) $109,000

Answer 1

C

Question 2

Dora's Blankets and Bedding had a sale of $600 to a charge customer, terms 2/15, n/30. Dora should record this transaction as follows: (Round intermediary calculations to the nearest cent and final answers to the whole dollar.)

A) debit Accounts Receivable $600; credit Sales $600.
B) debit Cash $600; credit Sales $600.
C) debit Accounts Receivable $588; debit Sales Discounts $12; credit Sales $600.
D) debit Sales $600; credit Accounts Receivable $600.

Answer 2

A

Question 3

A characteristic of Sales Returns and Allowances is that:

A) it has a credit balance.
B) it tracks returns from customers.
C) it is a contra-revenue account.
D) B and C are correct.

Answer 3

D

Question 4

Gross sales equals:

A) net sales minus sales discount.
B) sales discount less net income.
C) the total of cash sales and credit sales.
D) supplies minus inventory.

Question 5

The side that increases the balance of the Sales Discount account is:

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

Question 6

Betsy's pottery sold 300 tiles at $40 each to a charge customer, terms 1/10, n/30. Which entry is required to record this transaction? (Round intermediary calculations to the nearest cent and final answers to the whole dollar.)

A) Debit Cash $12,000; credit Tile Sales $12,000
B) Debit Accounts Payable $11,880; credit Tile Sales $11,880
C) Debit Accounts Receivable $11,880; debit Sales Discount $120; credit Tile Sales $12,000
D) Debit Accounts Receivable $12,000; credit Tile Sales $12,000

Question 7

A characteristic of the account, Sales Discount, includes the following:

A) debit balance.
B) contra-revenue account.
C) records the cash discounts granted to customers.
D) All of these answers are correct.

Question 8

Merchants who buy goods from wholesalers for resale to customers are:

A) merchandisers.
B) retailers.
C) service companies.
D) None of the above is correct.

Question 9

Credit terms of 3/15, n/30 mean that:

A) a 3% discount is allowed if the bill is paid within between 15 and 30 days.
B) a 3% discount is allowed if the bill is paid within 30 days.
C) a 3% discount is allowed if the bill is paid before the 15th day of the following month.
D) a 3% discount is allowed if the customer pays the bill within 15 days, or the entry amount is due within 30 days.

Question 10

Sales Tax Payable is a:

A) liability account with a debit balance.
B) liability account with a credit balance.
C) contra-asset account with a debit balance.
D) contra-asset account with a credit balance.

Question 11

The length of time the customer is allowed to repay the bill is the:

A) discount period.
B) short period.
C) credit period.
D) return period.

Question 12

A contra-revenue account with a debit balance for returned goods is called:

A) Sales Returns and Allowances.
B) Sales Discount.
C) Prepaid Returns.
D) the discount period.

Question 13

Reduction given to company customers for early payment is a:

A) sales returns and allowance.
B) purchase discount.
C) sales discount.
D) customer discount.

Question 14

The time frame when customers are allowed to pay their bills and still be eligible for a discount is the:

A) credit period.
B) discount period.
C) short period.
D) allowance period.

Question 15

Santa Materials sold goods for $3,200 plus 5% sales tax to a charge customer, terms n/30. Which entry is required to record this transaction?

A) Debit Accounts Receivable $3,360; credit Sales Tax Payable $160; credit Sales $3,200
B) Debit Cash $3,200; credit Sales $3,200
C) Debit Accounts Receivable $3,200; credit Sales $3,200
D) Debit Accounts Receivable $3,360; credit Sales $3,360

Question 16

Net sales equal:

A) gross sales.
B) gross sales - sales returns and allowances.
C) gross sales - sales returns and allowances - sales discounts.
D) gross sales - gross profit.

Question 17

Home Restoration reports net sales of $70,000. If sales returns and allowances are $13,000 and sales discounts are $2,500, what are gross sales?

A) $70,000
B) $85,500
C) $80,500
D) $54,500

Question 18

The normal balance of the Sales Returns and Allowances account is:

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

Question 19

Merchandise is:

A) the same as inventory.
B) an asset.
C) the same as supplies.
D) Both A and B are correct.

Question 20

The liability account used to record sales tax owed is:

A) Sales Tax Expense.
B) Prepaid Taxes.
C) Sales Tax Payable.
D) Sales Returns and Allowances.

Question 21

Customer returned merchandise for credit. This will be recorded with:

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

Question 22

Secret Trails received payment in full within the credit period for horse boarding for $1,300 plus 4% sales tax. Terms of the sale were 3/10, n/30. Which entry is required to record this? (Round intermediary calculations to the nearest cent and final answers to the whole dollar.)

A) Debit Cash, $1,300; credit Sales, $1,300
B) Debit Cash, $1,313; debit Sales Discount $39; credit Accounts Receivable, $1,352
C) Debit Cash, $1,352; credit Sales, $1,352
D) Debit Cash, $1,313; credit Sales, $1,313

Question 23

The document indicating to the customer that the seller is reducing the amount owed by the customer is a:

A) credit memorandum.
B) sales discount.
C) customer allowance.
D) debit memorandum.

Question 24

A sales discount correctly taken by the charge customer was debited to Sales at the time the entry was recorded. This error will cause:

A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the sales discount account to be understated.
D) the net sales account for the period to be overstated.

Question 25

Sales discounts are NOT taken on which of the following?

A) Sales Tax
B) Freight
C) Merchandise returned
D) Sales Discounts are not taken on any of the above.

Question 26

Sold merchandise on account would be recorded with:

A) a debit to an asset account.
B) a debit to a liability account.
C) a debit to Capital.
D) None of these is correct.

Question 27

The total of all cash sales and credit sales equals:

A) net sales.
B) gross sales.
C) accounts receivable.
D) accounts payable.

Question 28

Mike returned $300 of merchandise to Secret Trails. His original purchase was $600, with terms 1/10, n/30. If Mike pays the balance of his account after the discount period, how much should he pay? (Round your calculations to the nearest whole dollar.)

A) $306
B) $294
C) $300
D) $600

Question 29

H.R. Camping sold goods for $200 to a charge customer. The customer returned for credit $100 worth of goods. Which entry is required to record the return transaction?

A) Debit Sales Returns and Allowances $100 credit Accounts Receivable $100
B) Debit Sales Returns and Allowances $100; credit Sales $100
C) Debit Sales $100; credit Sales Returns and Allowances $100
D) Debit Accounts Receivable $100; credit Sales Returns and Allowances $100

Question 30

The arrangements between buyer and seller as to when payments for merchandise are to be made are called:

A) credit terms.
B) net allowance.
C) cash on demand.
D) discount period.

Question 31

If management wanted to determine if customers were returning goods at a higher rate than usual, it could use the Sales Discounts account to analyze the information.

Question 32

Bob sold goods for $500 to a charge customer. The customer returned for credit $35 worth of goods. Terms of the sale were 2/10, n/30. If the customer pays the amount owed within the discount period, what is the amount the customer should pay? (Round your calculations to the nearest whole dollar.)

A) $456
B) $465
C) $500
D) $450

Question 33

Merchandise sold on credit was returned for credit and recorded with a debit to Sales Returns and Allowances and a credit to Accounts Payable. This error will cause:

A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the assets to be overstated.
D) the accounts payable to be understated.

Question 34

The normal balance of Sales Tax Payable is a debit.

Question 35

A wholesale customer returned merchandise having already paid for it within the cash discount period. The return will be recorded with:

A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Capital.
D) None of these is correct.

Question 36

Net Sales equals Gross Sales - Sales Returns and Allowances - Accounts Receivable.

Question 37

The contra-revenue accounts include:

A) Sales Tax Payable.
B) Sales Returns and Allowances.
C) Sales Discount.
D) Both B and C are correct.

Question 38

Monica's Closet received payment in full within the discount period for goods sold on a $1,000 sales invoice, terms 2/10, n/30. Which entry records this payment? (Round your calculations to the nearest whole dollar.)

A) Debit Accounts Receivable $1,000; credit Sales $1,000
B) Debit Cash $1,000; credit Accounts Receivable $1,000
C) Debit Cash $980, debit Sales Discount $20; credit Sales $1,000
D) Debit Cash $980, debit Sales Discount $20; credit Accounts Receivable $1,000

Question 39

Sara's Jewelry sold 40 necklaces for $35 each to a credit customer. The invoice included a 7% sales tax and payment terms of 2/10, n/30. In addition, 5 necklaces were returned prior to payment. The entry to record the original sale would include: (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

A) a debit to Accounts Receivable for $1,498.
B) a debit to Accounts Receivable for $1,400.
C) a debit to Sales for $1,498.
D) a debit to Sales for $1,400.

Question 40

Mel's Art studio was moving and sold furniture that was no longer needed for cash. The entry would include:

A) a credit to Sales.
B) a debit to Sales.
C) a credit to Furniture.
D) a credit to Cash.

Question 41

Compare and discuss a discount period versus a credit period.

Question 42

Sales Returns and Allowances is a contra-sales account.

Question 43

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 44

Calculate gross sales:
net sales = $100,000
sales returns and allowances = $25,000
sales discounts = $30,000
accounts receivable = $12,000

Question 45

The Sales Returns and Allowances account is a revenue account.

Question 46

Sales Tax Payable represents an asset on the books of the seller.

Question 47

Sales is a revenue account.

Question 48

Explain why the account Sales Tax Payable is credited when a sale is made subject to a sales tax?

Question 49

Sales Discounts is a liability account.

Question 50

Terms of 3/10, n/30 means that a customer is allowed a 3% discount if he or she pays before the 10th day of the month following the sale.

Question 51

If a customer returns merchandise, the income for that period will be increased.

Question 52

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 53

Use the following information to answer the question below: The Net Sales are ________.

Question 54

The time a customer is granted to pay the bill is the discount period.

Question 55

When a customer returns defective office supplies, the Sales Returns and Allowances account will be debited.

Question 56

Determine the amount of net sales given:
gross sales = $250,000
sales discounts = $40,000
sales returns and allowances = $35,000
$ ________

Question 57

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 58

Sales Discounts and Sales Returns and Allowances are contra-asset accounts.

Question 59

If cash flow is so important to merchandisers, why do they extend credit to their customers?

Question 60

Sales tax collected by the seller is not included in the seller's total revenue.

Question 61

A record showing the activity and the balances owed by each customer is called the:

A) accounts payable journal.
B) sales journal.
C) bank journal.
D) accounts receivable subsidiary ledger.

Question 62

When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the:

A) primary account.
B) subsidiary account.
C) receivable account.
D) controlling account.

Question 63

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 64

The return of merchandise by a credit customer was recorded with a debit to Accounts Payable and a credit to Accounts Receivable and the subsidiary ledger. This error will cause:

A) the net income for the period to be overstated.
B) the net Sales for the period to be overstated
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.

Question 65

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 66

The accounts receivable subsidiary ledger:

A) is organized in alphabetical order.
B) is not kept in the same book as Accounts Receivable.
C) should equal the controlling account in the general ledger.
D) All of the above are correct.

Question 67

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 68

A checkmark in the PR column in the general journal means:

A) the entry was recorded correctly.
B) the amount was posted to the controlling account.
C) the amount was recorded in the subsidiary ledger.
D) the payroll was paid.

Question 69

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 70

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 71

Entries to customers' accounts for sales are posted in the:

A) accounts receivable subsidiary ledger.
B) accounts payable subsidiary ledger.
C) adjustment subsidiary ledger.
D) sales subsidiary ledger.

Question 72

If a credit memorandum is issued, what account will be decreased on the seller's books?

A) Accounts Receivable
B) Sales Discounts
C) Sales
D) Sales Returns and Allowances

Question 73

The normal balance of the accounts receivable subsidiary ledger is:

A) credit.
B) debit.
C) It does not have a normal balance.
D) Not enough information provided.

Question 74

Every controlling account must have its own:

A) primary ledger.
B) general ledger.
C) subsidiary ledger.
D) general journal.

Question 75

The principal ledger containing all the balance sheet and income statement accounts is the:

A) general ledger.
B) creditors' ledger.
C) customers' ledger.
D) subsidiary ledger.

Question 76

For each of the following, identify in column 1 the category to which the account belongs, in column 2 the normal balance for the account, and in column 3 the financial statement on which the account balance is reported.

Question 77

Which of the following statements about subsidiary ledgers is most accurate?

A) The subsidiary ledger accounts will never equal the control account in the general ledger.
B) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for Accounts Receivable.
C) The subsidiary ledger accounts will equal the amount of cash sales.
D) All of these answers are correct.

Question 78

Recording to the accounts receivable subsidiary ledger is done:

A) daily.
B) monthly.
C) weekly.
D) annually.

Question 79

If a credit memorandum is issued, what account will be increased on the seller's books?

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

Question 80

Accounts of a single type are kept in the:

A) supplemental ledger.
B) primary ledger.
C) subsidiary ledger.
D) None of these answers is correct.