Deck 9: Sales and Purchases

Question 1

Customers' individual accounts are included in a subsidiary ledger referred to as the

A) accounts payable ledger.
B) controlling ledger.
C) miscellaneous ledger.
D) accounts receivable ledger.
E) general ledger.

Answer 1

D

Question 2

The individual amounts in the Accounts Payable Credit column of the purchases journal are posted

A) individually to the Accounts Payable account in the general ledger.
B) individually to the accounts payable ledger.
C) individually to the Purchases account in the general ledger.
D) in total to the accounts payable ledger.
E) in total to the accounts receivable ledger.

Answer 2

B

Question 3

Jenny purchases goods for $650 on account. She is later issued a credit memorandum to receive credit for the return of $150 of goods. The balance due is _____.

A) $150
B) $500
C) $650
D) $800
E) $0

Answer 3

B

Question 4

The total of the schedule of accounts receivable must equal

A) the total of the sales on account for the month.
B) the balance of the Accounts Receivable controlling account.
C) the total of all sales for the month.
D) sales on account less cash sales for the month.
E) the balance of the Accounts Payable controlling account.

Question 5

The total of the customer accounts receivable ledger at the end of the accounting period must equal the total of the

A) creditors' accounts payable ledger.
B) Accounts Payable account in the general ledger.
C) Accounts Receivable account in the general ledger.
D) Accounts Receivable Credit column in the cash receipts journal.
E) Accounts Receivable Debit column in the cash receipts journal.

Question 6

Amounts are posted individually from the purchases journal to the

A) Credit column of the creditors' accounts in the accounts payable ledger.
B) Credit column of the Inventory account in the general ledger.
C) Credit column of the Accounts Receivable account in the general ledger.
D) Debit column of the Cash account in the general ledger.
E) Credit column of the Cash account in the general ledger.

Question 7

The entries in the sales journal must also be posted individually to the

A) Accounts Receivable and Sales accounts.
B) Sales account.
C) Accounts Receivable ledger.
D) accounts receivable controlling account.
E) accounts payable ledger.

Question 8

Entries in the purchases journal are posted to the

A) general ledger only.
B) accounts payable ledger only.
C) accounts payable ledger and the purchases ledger.
D) general ledger and the accounts payable ledger.
E) accounts payable ledger and the accounts receivable ledger.

Question 9

The schedule of accounts receivable shows

A) a list of sales returns for the month.
B) total sales for the month.
C) a list of individual creditors.
D) a list of individual sales.
E) a list of the balances of credit customer accounts.

Question 10

Some of the goods that were previously sold to a customer on account were returned to the seller, and the seller used a form to show the amount and terms of the return. The source document for the journal entry for this return is called a

A) purchase invoice.
B) debit memorandum.
C) credit memorandum.
D) sales invoice.
E) return invoice.

Question 11

Assuming the use of special journals, the sale of merchandise to Jerri Wiles on account would be recorded in the

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

Question 12

Which of the following is recorded in the sales journal?

A) return of merchandise purchased for cash
B) sale of merchandise for cash
C) sale of merchandise on account
D) return of merchandise purchased on account
E) purchase of merchandise for cash

Question 13

Match the terms that follow with the correct definitions.
a.Form W-4
b.SUTA tax
c.Employee's individual earnings record
d.Worker's compensation insurance
e.Form 940
f.FICA Medicare
g.Form 941
h.FUTA tax
i.Form W-3
j.Form W-2
From the viewpoint of the buyer, a business form prepared by the seller that lists the items shipped, their cost, and the shipping terms is a(n)

A) purchase requisition.
B) COD statement.
C) purchase order.
D) sales requisition.
E) invoice.

Question 14

The account that is debited for every transaction in the sales journal is:

A) Cash.
B) Sales Discounts.
C) Accounts Receivable.
D) Sales Return.
E) Accounts Payable.

Question 15

The purchases journal is used for the purchase of

A) merchandise for cash.
B) merchandise on account.
C) assets other than merchandise for cash.
D) assets other than merchandise on account.
E) merchandise or other assets for cash.

Question 16

A one-column sales journal may be used to record

A) sales of supplies on account.
B) sales of goods on account.
C) sales of goods for cash.
D) sales of supplies for cash.
E) collections on account.

Question 17

Zoey Products bought goods from Lily Company. The next day, Zoey Products returned the goods because they had a defect. Zoey Products would record this:

A) as a debit memorandum.
B) as a sales memorandum.
C) as a purchase discount.
D) as a purchase return.
E) as an abnormal sale.

Question 18

The accounts payable ledger has postings from which of the following sets of journals?

A) Purchases, cash payments, and general
B) Purchases, cash receipts, and general
C) Purchases and sales
D) Cash payments and sales
E) Sales and cash payments

Question 19

The purpose of an accounts receivable ledger is

A) to provide information for customers who call.
B) to provide detailed information to management concerning Accounts Receivable accounts.
C) to provide information to be used in preparing a schedule of accounts receivable.
D) all of these.
E) none of these.

Question 20

When merchandise previously sold is returned for credit, the journal entry is

A) debit Sales; credit Accounts Receivable.
B) debit Sales Returns and Allowances; credit Accounts Payable.
C) debit Accounts Receivable; credit Sales Returns and Allowances.
D) debit Sales Returns and Allowances; credit Accounts Receivable.
E) debit Accounts Receivable; credit Purchases Discounts.

Question 21

Jones Co. takes a physical inventory count of their merchandise each year in order to update the inventory value. This is an example of a(n):

A) Perpetual Inventory System
B) Periodic Inventory System
C) Re-evaluation Inventory System
D) Adjusting Inventory System

Question 22

A controlling account can be found in the

A) general ledger.
B) source documents.
C) accounts receivable ledger.
D) income statement.
E) accounts payable ledger.

Question 23

A contra-account that records the company's returns of merchandise purchased from suppliers:

A) Purchases Discounts
B) Sales Returns and Allowances
C) Freight-In
D) Purchases Returns and Allowances

Question 24

Account type and normal balance of the Purchases Account:

A) Asset, DR
B) Asset, CR
C) Expense, DR
D) Expense, CR

Question 25

The entries in a purchases journal are posted to which of the following subsidiary ledger?

A) Accounts receivable
B) Sales
C) Purchases
D) Inventory
E) Accounts payable

Question 26

Classic Accessories, Inc. sold merchandise on account to Hi-View Industries for $2,950. What is the journal entry Classic Accessories will use to record this transaction?

A)
$\begin{array} { l l } \text { Account Receivable, Hi-View } & \text { DR } \\\text { Sales } & \text { CR }\end{array}$
B)
$\begin{array} { l l } \text { Cash } & \text { DR } \\\text { Sales } & \text { CR }\end{array}$
C)
Sales $\quad$ DR
Accounts Receivable, Hi-View $\quad$ CR
D)
$\begin{array} { l l } \text { Sales } & \text { DR } \\\text { Cash } & \text { CR }\end{array}$

Question 27

A contra-revenue account to record returned goods is:

A) Freight-In
B) Purchases Returns and Allowances
C) Sales Returns and Allowances
D) Sales Discounts

Question 28

Type of account and normal balance of Sales Discount:

A) Asset, DR
B) Revenue, CR
C) Liability, CR
D) Contra-Revenue, DR

Question 29

An account used to record transportation charges on incoming merchandise intended for resale:

A) Freight-Out
B) Freight-Received
C) Freight-In
D) Merchandise Freight

Question 30

Smith Co. keeps a continuous record of their inventories and costs of goods. This is an example of a:

A) Perpetual Inventory System
B) Periodic Inventory System
C) Continuous Inventory System
D) Re-evaluation Inventory System

Question 31

The _____ is the source for preparing the schedule of accounts receivable.

A) credit memorandum
B) inventory control account
C) default control account
D) accounts payable ledger
E) accounts receivable ledger

Question 32

When goods previously purchased on account are returned for credit, the journal entry is

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

Question 33

A liability account used to record sales tax collected and owed:

A) Sales Tax Expense
B) Sales Tax Payable
C) Merchandise Tax
D) Prepaid Taxes

Question 34

The account used to record transportation costs of goods purchased for resale is

A) Freight Out.
B) Freight In.
C) Freight for Cash.
D) Transportation Out.
E) Transportation Expense.

Question 35

Freight charges may be

A) listed separately on the invoice.
B) billed separately from the invoice.
C) included in the price of the goods on the invoice.
D) all of these.
E) none of these.

Question 36

A single summarizing account in the general ledger, representing all the accounts in a particular subsidiary ledger, is referred to as a

A) response account.
B) summary account.
C) special account.
D) pass-through account.
E) controlling account.

Question 37

The ledger that provides a separate record of credit customers and their respective balances is:

A) Accounts Ledger
B) Accounts Receivable Ledger
C) Accounts Payable Ledger
D) Customer Ledger

Question 38

A major advantage of controlling accounts is that their use makes it possible to reduce the number of

A) entries in subsidiary ledgers.
B) columns in special journals.
C) accounts in the general ledger.
D) all of these.
E) none of these.

Question 39

An account that is used to record merchandise bought for resale:

A) Purchases Account
B) Purchases Returns & Allowance
C) Sales Discount
D) Supplies

Question 40

Chandler Company bought goods from Lisel Company, with shipping terms FOB destination. Which of the following statements correctly identifies who is to pay the freight bill when the title is transferred?

A) Lisel pays transportation, and title is exchanged when goods are unloaded at Chandler Company.
B) Chandler pays transportation, and title is exchanged when goods are loaded at Lisel Company.
C) Lisel pays transportation, and title is exchanged when goods are unloaded at Lisel Company.
D) The buyer pays the freight, thus the term FOB (free on board).
E) Chandler pays transportation, and title is exchanged when goods are unloaded at Chandler Company.

Question 41

Jackson Co. sold merchandise on account to S. Thomas, invoice no. 121, for $125.50, plus 5% sales tax. Which of the following is true about the journal entry to record this transaction?

A) Debit to Sales for $125.50, Credit to Sales Tax Payable for $6.275
B) Debit to Sales Tax Payable for $125.50, Credit to Accounts Receivable for $6.275
C) Debit to Accounts Receivable for $131.775, Credit to Sales Tax Payable for $6.275
D) Debit to Sales Tax Payable for $131.775, Credit to Accounts Receivable for $6.275

Question 42

Jackson Company uses the perpetual inventory system. It sold merchandise to Jenny. After one month, Jenny returned $250 worth of the merchandise which had a cost of $150. Which of the following journal entries records the cost of merchandise returned?

A) A debit to Accounts Receivable of $250, a credit to Sales Return and Allowances of $250
B) A debit to Cost of Goods Sold of $150, a credit to Merchandise Inventory of $150
C) A debit to Merchandise Inventory of $150, a credit to Cost of Goods Sold of $150
D) A debit to Accounts Receivable of $250, a credit to Merchandise Inventory of $250

Question 43

Lasalle Co. sold merchandise on account in the amount of $550. The sales tax rate is 6.5%. What is the amount credited to the Sales Tax Payable account.

A) $550
B) $35.75
C) $585.75
D) $514.35

Question 44

Which of the following is a characteristic of the sales returns and allowance account?

A) It has a credit balance.
B) It tracks returns from vendors.
C) It tracks returns from customers.
D) It is a contra account to Purchases.

Question 45

XYZ Motors makes a sale of $15,600 on account. The sales tax rate is 8%. What is the amount debited to Accounts Receivable in the general journal on the sale of merchandise?

A) $1,248
B) $15,600
C) $14,352
D) $16,848

Question 46

Which of the following is an example of good internal controls over purchases?

A) Purchases are made only after proper authorization is given.
B) Payment for purchases should be based on the purchase order only.
C) The person who orders should be authorized for payment.
D) The person who writes the check should be involved in the foregoing purchasing procedures.

Question 47

When goods are shipped FOB shipping point, which of the following is NOT true?

A) The seller assumes responsibility for all freight costs
B) Shipping costs may be listed separately on the customer's invoice
C) The seller may pay the freight charges directly, but invoices the buyer.
D) The buyer is responsible for all freight costs

Question 48

A company's written offer to buy goods:

A) Offer for Goods
B) Purchase Requisition
C) Purchase Order
D) Purchase Source Document

Question 49

A form used by business to inform customers that their account balance has been reduced is:

A) Debit Memorandum
B) Credit Memorandum
C) Adjustment Memorandum
D) Sales Return and Allowance Memo

Question 50

J. Smith purchases merchandise from Hi-View Industries for $25,250 on account. Upon inspection of the merchandise received, J. Smith discovers damaged goods in the amount of $1,000 and requests to return the damaged merchandise to Hi-View Industries. What source document would Hi-View industries use for the journal entry to process this return?

A) Debit Memorandum
B) Credit Memorandum
C) Purchase Memorandum
D) Return Memorandum

Question 51

A schedule of Accounts Receivable is prepared from:

A) Trial Balance
B) Balance Sheet
C) Accounts Receivable Subsidiary Ledger
D) Accounts Receivable Control Account

Question 52

An account in the general ledger that summarizes the balances found in the subsidiary ledger(s) is:

A) General Account
B) Controlling Account
C) Ledger Account
D) Journal Account

Question 53

Hi-View Industries, sells merchandise to Action Powersports on account. As terms of the deal, Hi-View Industries will coordinate the shipment, but Action Powersports is responsible for paying the shipping costs. This is an example of:

A) FOB Destination
B) FOB Shipping Point
C) Freight-In
D) Freight-Out

Question 54

A subsidiary ledger that contains individual accounts of creditors.

A) Purchase Journal
B) Accounts Payable Ledger
C) Creditor Ledger
D) Vendor Ledger

Question 55

What is the correct entry to record sales tax collected?

A) Sales Tax Expense DR
B) Sales Tax Expense CR
C) Sales Tax Payable DR
D) Sales Tax Payable CR

Question 56

Jimmie Jones purchases merchandise from GPS Industries for $15,500 on account. The terms were FOB Destination with freight costs of $100. Upon inspection of the merchandise received, Jimmie Jones discovers damaged goods in the amount of $2,500 and requests to return the damaged merchandise to GPS Industries. Once the return is processed, what is the new balance owed by Jimmie Jones?

A) $13,000
B) $13,100
C) $15,500
D) $15,600

Question 57

Special journals are books of original entry that help simplify the recording process. Which is NOT an example of a special journal?

A) Sales Journal
B) General Journal
C) Purchase Journal
D) Cash Receipts Journal
E) Cash Payments Journal

Question 58

Jones Co. sells merchandise to J. Smith on account. As the seller Jones Co. pays the cost of transportation to delivery the goods and will not be reimbursed from J. Smith. This is an example of:

A) FOB Destination
B) FOB Shipping Point
C) Freight-In
D) Freight-Out

Question 59

Merchandising companies include

A) Wholesales
B) Retailers
C) Both A & B
D) Neither A or B

Question 60

Under the perpetual inventory system, the sale of goods is recorded with two entries. One entry debits Cash or Accounts Receivable and credits sales. The second entry

A) debits Cost of Goods Sold and credits Merchandise Inventory.
B) debits Merchandise Inventory and credits Cost of Goods Sold.
C) debits Cost of Goods Sold and credit Purchases.
D) debits Purchases and credits Merchandise Inventory.
E) debits Income Summary and credits Cost of Goods Sold.

Question 61

Cash sales are recorded in the sales journal.

Question 62

When a customer returns goods for credit, the transaction is recorded in the purchases journal.

Question 63

After posting the total goods sold on account to the Accounts Receivable account, the accountant places a check mark below the Accounts Receivable column in the sales journal.

Question 64

Generally, the Accounts Receivable controlling account will be up to date only at the end of the month.

Question 65

When a journal entry includes either a debit or a credit to Accounts Receivable, the amount must be posted to both the general ledger and the subsidiary ledger.

Question 66

AquaMarine Company uses the perpetual inventory system. It returned some merchandise and received credit memorandum of $18,000. Which of the following journal entries records this transaction?

A) A debit to Merchandise Inventory of $18,000, a credit to Accounts Payable of $18,000
B) A debit to Accounts Payable of $18,000, a credit to Merchandise Inventory of $18,000
C) A debit to Accounts Payable of $18,000, a credit to Purchase Return and Allowances of $18,000
D) A debit to Purchase Return and Allowances of $18,000, a credit to Accounts Payable of $18,000

Question 67

Under the accrual basis of accounting, sales on account are not recorded in the sales journal until payment is received.

Question 68

When recording sales of goods for cash, debit Accounts Receivable and credit Cash.

Question 69

Debiting the Sales Returns and Allowances account will have the same effect on sales as a deduction from the Sales account.

Question 70

The total of goods sold on account is normally posted daily from the sales journal to the general ledger.

Question 71

The spaces in the purchases journal used for the invoice date and terms are intended to make it easier to pay the bill on time.

Question 72

Transactions in the sales journal are posted both to the general ledger and the accounts receivable ledger.

Question 73

Parker Company uses the perpetual inventory system. It bought merchandise on account from Beige Inc., invoice no. 342, $20,000; terms 1/15, n/30; dated June 25; FOB San Francisco, freight prepaid and added to the invoice, $1,800 (total $21,800). Which of the following journal entries records this purchase transaction?

A) A debit to Merchandise Inventory of $23,600, a credit to Accounts Payable of $23,600
B) A debit to Merchandise Inventory of $21,800, a credit to Accounts Payable of $21,800
C) A debit to Merchandise Inventory of $20,000, a debit to Freight of $1,800, a credit to Accounts Payable of $21,800
D) A debit to Cost of Goods Purchased of $20,000, a debit to Freight Out of $1,800, a credit to Accounts Payable of $21,800

Question 74

One of the advantages of a sales journal is that it eliminates individual posting of entries to the Accounts Receivable account in the general ledger.

Question 75

The Purchases account is used to record the buying of goods and supplies.

Question 76

The invoice that is first prepared by the seller is called a sales invoice; the buyer calls the same invoice a purchase order.

Question 77

The seller would record the return of merchandise sold on account in the sales journal.

Question 78

Azure Company uses the perpetual inventory system. On May 3, it sold merchandise on account to Sigma Enterprises, invoice no. 672, $4,500. Cost of inventory sold is $3,850. Which of the following journal entries records the effect on merchandise inventory?

A) A debit to Accounts Receivable of $4,500, a credit to Merchandise Inventory of $4,500
B) A debit to Cost of Goods Sold of $4,500, a credit to Merchandise Inventory of $4,500
C) A debit to Cost of Goods Sold of $3,850, a credit to Merchandise Inventory of $3,850
D) A debit to Accounts Receivable of $3,850, a credit to Merchandise Inventory of $3,850

Question 79

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

Question 80

For a sale of $300, on which 8 percent sales tax is charged, the amount debited to Accounts Receivable is $324.