Deck 7: Accounting for Sales and Accounts Receivable

Question 1

The Sales account is classified as a(n)

A)liability account.
B)asset account.
C)expense account.
D)revenue account.

Answer 1

D

Question 2

The abbreviation S1 in the Posting Reference column of an account shows that the data was posted from page 1 of the sales journal.

Answer 2

True

Question 3

A sales return or a sales allowance is usually recorded in the sales journal.

Answer 3

False

Question 4

The individual amounts in the Accounts Receivable Debit column of a sales journal should be posted to the accounts receivable subsidiary ledger, and the column total should be posted to the Accounts Receivable account in the general ledger.

Question 5

In a firm that uses special journals, a sale of merchandise on credit is recorded in the

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

Question 6

To indicate that the column totals of the sales journal have been posted, a check mark is entered under the column total.

Question 7

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

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

Question 8

Identify the statement below that correctly describes the Sales Returns and Allowances account.

A)It normally has a debit balance.
B)It is a liability account.
C)It is an expense account.
D)It normally has a credit balance.

Question 9

A firm that sells goods that it purchases for re-sale is a

A)merchandising business.
B)non-profit business.
C)service business.
D)manufacturing business.

Question 10

In a firm that uses special journals, an allowance given for damaged merchandise is recorded in the

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

Question 11

A customer who returns goods or receives an allowance is entitled to a credit for the appropriate amount of sales tax if tax was charged on the original sale.

Question 12

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

Question 13

The Sales account is classified as

A)a revenue account.
B)a liability account.
C)a contra account.
D)an asset account.

Question 14

After all postings have been made, the totals of the balances in the accounts receivable subsidiary ledger should equal the balance of the Accounts Receivable account in the general ledger.

Question 15

The balance of the Sales Returns and Allowances account is subtracted from the balance of the Accounts Receivable account in the Assets section of the balance sheet.

Question 16

In a firm that uses special journals, the acceptance of a return of merchandise from a credit customer is recorded in the

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

Question 17

ABC Company uses special journals. When making a credit sale of $700 to a customer, the company would record the sale by:

A)entering $700 in the Accounts Receivable Debit column and $700 in the Sales Credit column of the sales journal.
B)entering $700 in the Accounts Payable Credit column and $700 in the Sales Credit column of the sales journal.
C)entering $700 in the Accounts Receivable Credit column and $700 in the Sales Debit column of the sales journal.
D)entering $700 in the Sales Returns and Allowances Debit column and $700 in the Sales
Credit column of the general journal.

Question 18

In some states, a firm receives a discount for paying the amount of sales tax due on time.

Question 19

A merchandising business sells goods that it produces.

Question 20

When a business makes a sale on a bank credit card, the business is ultimately responsible for collecting the amount owed from the customer.

Question 21

GiGi's Sporting Goods uses special journals. If a credit customer returns $400 of goods on which
$24 of sales tax was charged, the journal entry to record the return would include:

A)a credit to the Sales Tax Payable account for $24.
B)a debit to the Sales Returns and Allowances account for $424.
C)a credit to the Accounts Receivable account for $424.
D)a debit to the Sales account for $400.

Question 22

If a firm had sales of $68,000 during a period and sales returns and allowances of $5,600, its net sales were

A)$5,600.
B)$73,600.
C)$68,000.
D)$62,400.

Question 23

The Sales Returns and Allowances account is classified as

A)an asset account.
B)a contra asset account.
C)a revenue account.
D)a contra revenue account.

Question 24

In a sales journal used to record taxable sales, the total of the Accounts Receivable column should equal

A)the total of the Sales column.
B)the total of the Sales Tax Payable column.
C)the sum of the totals of the Sales Tax Payable column and the Sales column.
D)the difference between the total of the Sales Tax Payable column and the total of the Sales column.

Question 25

In May, a retailer recorded credit sales of $10,000. Assuming the sales tax rate is 7 percent, the entry to record the sales in the sales journal would include:

A)a credit to Sales of $10,700.
B)a debit to Accounts Receivable of $10,700.
C)a debit to Sales Tax Payable of $700.
D)a credit to Accounts Receivable of $10,700.

Question 26

After all postings have been made, the total of the schedule of accounts receivable should equal

A)the balance of the Accounts Receivable account in the general ledger.
B)the total of the Accounts Receivable Debit column in the sales journal.
C)the total of all sales on account for the accounting period.
D)the balance of the Sales account.

Question 27

Which of the following statements is correct?

A)To provide an adequate audit trail, sales on credit should be recorded in both the sales journal and the general journal.
B)The complete information for each sale of merchandise on credit can be recorded on one line of the general journal.
C)The sales journal is used for recording both cash sales and credit sales.
D)Since the sales journal is used for a single purpose, there is no need to enter any descriptions.

Question 28

To find the balance due from an individual customer, the accountant would refer to

A)the sales journal.
B)the accounts receivable subsidiary ledger.
C)the Accounts Receivable account in the general ledger.
D)the Sales account in the general ledger.

Question 29

Ables Budget Boutique uses special journals. If a credit customer returns $40 of goods on which $3 of sales tax was charged, identify the statement below that would be correct when posting the transaction.

A)A credit of $40 would be posted to the customer's account in the accounts receivable ledger.
B)A debit of $43 would be posted to the customer's account in the accounts receivable ledger.
C)A credit of $43 would be posted to the customer's account in the accounts receivable ledger.
D)A debit of $40 would be posted to the customer's account in the accounts receivable ledger.

Question 30

A wholesale firm sold merchandise with a list price of $1,800 and trade discounts of 30 and 15 percent. What amount will be credited to sales in the sales journal?

A)$1,800
B)$810
C)$990
D)$1,071

Question 31

Which of the following statements is not correct?

A)When special journals are used, postings to the accounts receivable account in the general ledger are usually made once a month on the last day of the month.
B)Before any posting to the subsidiary ledger takes place, the equality of the debits and credits recorded in the sales journal are proved by comparing and cross footing the column totals.
C)Before any posting to the general ledger takes place, the equality of the debits and credits recorded in the sales journal are proved by comparing and cross footing the column totals.
D)Postings to the accounts receivable subsidiary ledger are usually made once a month on the last day of the month.

Question 32

The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes

A)a debit to Accounts Receivable and a credit to Sales Returns and Allowances.
B)a debit to Sales Returns and Allowances and a credit to Accounts Receivable.
C)a debit to Sales and a credit to Sales Returns and Allowances.
D)a debit to Sales and a credit to Accounts Receivable.

Question 33

The Sales Returns and Allowances account is presented

A)on the income statement as an addition to Sales.
B)on the income statement as a deduction from Sales.
C)on the balance sheet as a deduction from Capital.
D)on the balance sheet as a deduction from Accounts Receivable.

Question 34

Which of the following statements is not correct?

A)The sales slip is the source document for sales on credit transactions.
B)A journal that is used to record only one type of a transaction is called a special journal.
C)Use of a sales journal eliminates repetition in posting individual entries to the Accounts Receivable account in the general ledger.
D)If the firm must collect sales tax on retail transactions, the sales journal should have a Sales Tax Payable Debit column.

Question 35

A wholesale business sells goods with a list price of $1,200 and a trade discount of 30 percent. The net price is

A)$1,560.
B)$360.
C)$840.
D)$1,200.

Question 36

A retailer recorded the following in June: cash sales $2,500; credit sales, $11,000; sales returns and allowances, $1,150. Assuming the sales tax rate is 6 percent, the entry to record the sales tax payment includes a debit to Sales Tax Payable for

A)$810.
B)$660.
C)$741.
D)$879.

Question 37

ABC Skiing Essentials uses special journals. If a credit customer returns $8,000 of goods on which
$560 of sales tax was charged, select the correct entry to record the return:

A)

B)

C)

D)

Question 38

If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in

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

Question 39

Merchandise is sold on credit for $900 plus 5 percent sales tax. The entry in the sales journal will include a debit to Accounts Receivable for

A)$905.00.
B)$945.00.
C)$904.50.
D)$900.00.

Question 40

The amount used by wholesalers to record sales in its sales journal is

A)the retail price.
B)the net price.
C)the list price.
D)the original price.

Question 41

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

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

Question 42

An example of a merchandising company is a

A)bookstore.
B)restaurant.
C)real estate office.
D)hair salon.

Question 43

A cash customer purchased $3,000 of merchandise on which sales tax of 7% was charged. The customer subsequently returned $500 of the merchandise for a refund. The amount of the cash refund is

A)$500.00
B)$35.00
C)$535.00
D)$210.00

Question 44

The entry to record a sale of merchandise on credit that is subject to sales tax includes a(n)
to Sales Tax Payable.

Question 45

Kay Sadia sold merchandise for $15,200 subject to a 7% sales tax. The entry in the sales journal will include a debit to Accounts Receivable for

A)$14,136.00
B)$12,664.00
C)$16,264.00
D)$15,200.00

Question 46

Which of the following describes Sales Tax Payable?

A)A revenue account with a normal credit balance.
B)A liability account with a normal credit balance.
C)An asset account with a normal debit balance.
D)A liability account with a normal debit balance.

Question 47

On the Income Statement, Sales Returns and Allowances have the effect of

A)decreasing total revenue.
B)increasing total revenue.
C)increasing total expenses.
D)decreasing total expenses.

Question 48

Kay Sadia sold merchandise for $15,200 subject to a 7% sales tax. The entry in the sales journal will include a credit to Sales for

A)$14,136.00
B)$12,664.00
C)$15,200.00
D)$16,264.00

Question 49

A(n)business sells goods that it purchases in finished form for resale.

Question 50

Kay Sadia sold merchandise for $15,200 subject to a 7% sales tax. The entry in the sales journal will include a credit to Sales tax payable for

A)$15,200.00
B)$1,064.00
C)$16,264.00
D)$14,136.00

Question 51

Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax. The entry in the sales journal will include a credit to Sales for

A)$2,452.50.
B)$2,250.00.
C)$2,092.50.
D)$2,362.00.

Question 52

On Deck Sports Memorabilia store sells a Babe Ruth rookie card for $10,500 on account. If the sales tax on the sale is 7%, what is the amount debited to Accounts Receivable.

A)$11,000
B)$10,500
C)$11,235
D)$9,765

Question 53

The amount of the trade discount taken by the customer is recorded as a(n)

A)liability.
B)asset.
C)reduction to the amount recorded as a sale.
D)expense.

Question 54

Merchandise is sold on credit for $900 plus 5% sales tax. The entry in the sales journal will include a credit to Sales for

A)$905.00
B)$904.50
C)$945.00
D)$900.00

Question 55

Many retailers accept bank credit cards. Review the statements below and identify the statement that is incorrect regarding bank credit cards.

A)The Cash account will be debited for the total amount involved in the daily deposit of the credit card sales slips.
B)Accounts Receivable will be debited when recording bank credit card sales.
C)The most widely accepted bank credit cards are MasterCard and Visa.
D)Banks charge the business a fee, called a discount for processing the sale.

Question 56

A wholesale business sells goods with a list price of $1,200 and a trade discount of 30 percent. The amount credited to the Sales account for the sale is

A)$765.00
B)$840.00
C)$360.00
D)$1,560.00

Question 57

JCPenney issues its own credit cards to its customers who have established credit with them. It's customers used these cards to charge $300 worth of sales. There is no sales tax associated with the sales. JCPenney would record these sales by:

A)debiting Accounts Receivable $300 and crediting Sales $300.
B)debiting Charge Card Sales $300 and crediting Sales Returns and Allowances $300.
C)debiting Cash $300 and crediting Sales $300.
D)debiting Sales $300 and crediting Accounts Receivable $300.

Question 58

Hour Place Clock Shop sold a grandfather clock for $2,250 subject to a 9% sales tax. The entry in the sales journal will include a debit to Accounts Receivable for

A)$2,452.50.
B)$2,250.00.
C)$2,092.50.
D)$2,362.00.

Question 59

A retailer gives an allowance to a customer for damaged merchandise. The entry to record the allowance would include

A)A credit to Sales.
B)a debit to Cash.
C)A debit to Sales Returns and Allowance
D)a debit to Accounts Receivable.

Question 60

Which of the following describes Sales Returns and Allowances?

A)A revenue account with a normal credit balance.
B)A contra revenue account with a normal debit balance.
C)A contra expense account with a normal credit balance.
D)An expense account with a normal debit balance.

Question 61

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

Question 62

All That Jazz Music Store had the following transactions during the month of August 2019. Record the transactions on page 15 of a sales journal and page 18 of a general journal. Total, prove, and rule the sales journal as of August 31.
Aug. 5 Sold a violin to Jim Stombres. Issued Sales Slip 515 for $6,500 plus sales tax of $325.
6 Sold a trombone to Kevin Folk. Issued Sales Slip 516 for $1,800 plus sales tax of $90.
8 Gave Jim Stombres an allowance for scratches on his violin sold on August 5, Sales Slip 515. Issued Credit Memorandum 318 for $105, which includes
$5.00 of sales tax.
15 Sold a trumpet to Jason Streng. Issued Sales Slip 517 for $2,500 plus sales tax of $125.
20 Sold a synthesizer to Samuel Jacks. Issued Sales Slip 518 for $175 plus sales tax of $8.75.
25 Accepted a return of a defective synthesizer from Samuel Jacks. The
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25 Accepted a return of a defective synthesizer from Samuel Jacks. The synthesizer was originally sold on August 20, Sales Slip 518. Issued Credit Memorandum 319 for $183.75, which includes sales tax of $8.75.

Question 63

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.
A. Accepted a return of merchandise from a credit customer
B. Collected sums on account from credit customers
C. Gave an allowance for damaged merchandise
D. Purchased merchandise on credit
E. Received an additional cash investment from the owner
F. Sold merchandise for cash
G. Sold merchandise on credit
H. Issued a check to pay a creditor on account

Question 64

The ________ ledger contains accounts for credit customers.

Question 65

Read the description of following transactions that are required during the accounting period for Drummond Consulting Services. Determine the account to be debited and the account to be credited.
A. Received a check from a credit customer on account.
B. Accepted a return of merchandise from a credit customer. The original sale involved sales tax.
C. Sold merchandise on credit. The transaction involved sales tax.
D. Gave an allowance to a credit customer for damaged merchandise. The original sale involved sales tax
E. Sold merchandise on credit. The transaction did not involve sales tax.

Question 66

Sales Tax Payable is classified as a(n)________ account.

Question 67

The reductions from list prices that many wholesale businesses offer their customers are called________ discounts.

Question 68

One of the customer accounts from the accounts receivable ledger for Paragon Consulting Services is shown below. Explain each of the entries that have been posted to this customer's subsidiary ledger account.

Question 69

Barnett's Electronics Store had the following transactions during the month of January 2019. Record the transactions on page 1 of a sales journal and page 1 of a general journal. Total, prove, and rule the sales journal as of January 31.
Jan. 4 Sold a television to Loretta Miller. Issued Sales Slip 101 for $325 plus sales tax of $16.25.
5 Sold a DVD player to Melvin Odom. Issued Sales Slip 102 for $450 plus sales tax of $22.50.
7 Gave Loretta Miller an allowance for scratches on her television sold on January 4, Sales Slip 101. Issued Credit Memorandum 101 for $52.50, which includes $2.50 of sales tax.
14 Sold a telephone system to Ginger Robinson. Issued Sales Slip 103 for $172 plus sales tax of $8.60.
19 Sold a pair of speakers to Richard Simms. Issued Sales Slip 104 for $87 plus sales tax of $4.35.
24 Accepted a return of a pair of defective speakers from Richard Simms. The speakers were originally sold on January 19, Sales Slip 104. Issued Credit Memorandum 102 for $91.35, which includes sales tax of $4.35.

Question 70

A(n)________ journal is a journal that is used to record only one type of transaction.

Question 71

Read the description of following transactions that are required during the accounting period for Mario´s Electronics. Determine the account and amount to be debited and the account and amount to be credited.
A. Sold $2,200 in merchandise on credit. The transaction did not involve sales tax.
B. Gave a $600 allowance to a credit customer for damaged merchandise. The original sale was subject to 8% sales tax
C. Received a check for $200 from a credit customer on account.
D. Sold $200 in merchandise for cash. The transaction is subject to 8% sales tax
E. Accepted a return of $100 in merchandise from a credit customer. The original sale was subject to 8% sales tax.

Question 72

Bradley's Appliance Store had the following transactions during the month of May 2019. Record the transactions on page 5 of a sales journal and page 8 of a general journal. Total, prove, and rule the sales journal as of May 31.
May 5 Sold a refrigerator to Mary Wilson. Issued Sales Slip 452 for $650 plus sales tax of $32.50.
6 Sold a freezer to Samantha Lee. Issued Sales Slip 453 for $900 plus sales tax of $45.
8 Gave Mary Wilson an allowance for scratches on her refrigerator sold on May 5, Sales Slip 452. Issued Credit Memorandum 118 for $57.75, which includes
$2.75 of sales tax.
15 Sold a portable television to Jill Hanna. Issued Sales Slip 454 for $345 plus sales tax of $17.25.
20 Sold a microwave oven to Steve Ferguson. Issued Sales Slip 455 for $175 plus sales tax of $8.75.
25 Accepted a return of a defective microwave oven from Steve Ferguson. The oven was originally sold on May 20, Sales Slip 455. Issued Credit Memorandum 119 for $183.75, which includes sales tax of $8.75.

Question 73

A list of all unpaid balances in the accounts receivable subsidiary ledger is called a(n)________ of accounts receivable.

Question 74

The sales journal for Simon Company is shown below. Describe how the amounts would be posted to the accounts receivable subsidiary ledger accounts.

Question 75

The quantity of goods kept on hand to sell to consumers is called ________.

Question 76

A ledger that contains detail accounts of a single type is called a(n)________ ledger.

Question 77

A business that sells goods and services directly to individual consumers is called a(n) business.

Question 78

To indicate that an amount has been posted from the sales journal to the accounts receivable subsidiary ledger, a(n)________ is placed in the Posting Reference column of the journal.

Question 79

When an accounts receivable subsidiary ledger is used, the Accounts Receivable account in the general ledger is considered to be a(n)________ account.

Question 80

The Sales Returns and Allowances account has a normal ________ balance.