Deck 7: Special Journals and Subsidiary Ledgers: the Basics: Purchases and Cash Payments Journals

Question 1

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 Cost of Goods Sold. 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.

Answer 1

A

Question 2

Marcel's Fashions started with $7,000 in Inventory and had the following transaction totals for the month of April: Sales $20,000
Sales Returns and Allowances 2,000
Cost of Goods Sold 8,000
Purchases ???
Freight 1,000
Purchases Returns and Allow. 2,000
Purchases Discounts 1,500
If ending Inventory for the period is $14,000, what is the total amount of purchases during the month?

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

Answer 2

C

Question 3

Hardware Restoration had a purchase of $40,000, a purchase return of $10,000, and a purchase discount of $1,500. What is the impact on Inventory?

A) $28,500
B) $30,000
C) $51,500
D) $38,500

Answer 3

A

Question 4

Fred's Footwear started with $7,000 in Inventory and had the following transaction totals for the month of April: Sales $20,000
Sales Returns and Allowances 2,000
Cost of Goods Sold 8,000
Purchases 14,000
Freight 1,000
Purchases Returns and Allow. 2,000
Purchases Discounts ???
If ending Inventory for the period is $11,000, what is the total of purchase discounts experienced?

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

Question 5

A characteristic of Cost of Goods Sold is that

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

Question 6

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

A) Cash
B) Accounts Payable
C) Cost of Goods Sold
D) Accounts Receivable

Question 7

R&R Lumber reports a purchases of $40,000, a purchase return of $6,000, and a purchase discount of $1,500. What is the impact on Inventory?

A) $47,500
B) $32,500
C) $38,500
D) $36,000

Question 8

Inventory is a(n)

A) cost.
B) asset.
C) liability.
D) revenue.

Question 9

The value of inventory includes

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

Question 10

Tyler returned $400 of merchandise within the discount period. The entry to record the return is to

A) debit Inventory for $400; credit Accounts Payable/Suppliers Name for $400.
B) debit Inventory for $400; credit Cash for $400.
C) debit to Accounts Payable/Suppliers Name for $400; credit Inventory for $400.
D) debit to Accounts Payable/Suppliers Name for $400, credit Cash for $400.

Question 11

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 credit to Supplies and a debit to Purchases.

Question 12

Jackie's Online Service started with $7,000 in Inventory and had the following transaction totals for the month: Sales $20,000
Sales Returns and Allowances 2,000
Cost of Goods Sold 8,000
Purchases 14,000
Freight 1,000
Purchases Returns and Allow. 2,000
Purchases Discounts 1,400
Ending Inventory for the period is

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

Question 13

Ralph's Dairy started with $5,000 in Inventory and had the following transaction totals for the month: Sales $10,000
Sales Returns and Allowances 1,000
Cost of Goods Sold 5,500
Purchases 7,000
Freight 500
Purchases Returns and Allowances 1,000
Purchases Discounts 700
Based on the above, ending Inventory for the period is

A) $4,300.
B) $6,300.
C) $5,300.
D) $5,800.

Question 14

Which of the following transactions will cause a liability to be credited and an asset account to be debited when the perpetual 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 for cash

Question 15

On February 12, Clare purchased $350 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) $343.
B) $383.
C) $350.
D) $390.

Question 16

Purchases Returns and Allowances

A) increase Inventory.
B) decrease Inventory.
C) have no effect on Inventory.
D) Not enough information provided.

Question 17

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

A) debit to Inventory for $40.
B) credit to Accounts Payable for $2,000.
C) debit to Accounts Payable for $2,000.
D) credit to Cash for $2,000.

Question 18

A characteristic of Inventory is that

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

Question 19

On November 30, Janoch's Dog Kennel purchased $500 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 as payable is

A) $500.
B) $540.
C) $520.
D) $550.

Question 20

The account used to record the buyer's shipping costs is

A) Discounts.
B) Inventory.
C) Freight.
D) Accounts Payable.

Question 21

The account Inventory includes the shipping costs to the buyer.

Question 22

The accounts payable subsidiary ledger is organized in chronological order.

Question 23

Mary's Pie Company had a starting Inventory balance of $13,550 and the following transaction totals for the month. Use this information to answer the questions below.
Sales Returns and Allowances $300
Sales Discounts 200
Purchases 3,000
Sales 8,000
Cost of Goods Sold 5,500
Purchases Discount 300
Freight 600
Based on the above, ending Inventory is ________.

Question 24

The main reason most businesses do not use only a General Journal is

A) a General Journal is much too inefficient.
B) a General Journal is prone to many errors.
C) two or more clerks cannot use the General Journal at the same time.
D) both A and C are correct.

Question 25

Every transaction in a purchases journal includes

A) a credit to Cash.
B) a credit to Inventory.
C) a credit to Accounts Payable.
D) a debit to Office Supplies.

Question 26

The account Inventory includes the shipping costs to the seller.

Question 27

A debit memo for the return of merchandise is usually recorded in the

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

Question 28

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

Question 29

Barnie's Cafe started with $4,000 in Inventory and had the following transaction totals for the month: Sales $10,000
Sales Returns and Allowances 1,000
Cost of Goods Sold $4,000
Accounts Payable 5,500
Purchases 7,000
Purchases Returns and Allowances 1,000
Purchases Discounts 700
Net purchases for the period are

A) $4,300.
B) $6,300.
C) $5,300.
D) $5,800.

Question 30

C. Fong returned $200 of merchandise within the discount period. The entry to record the return is

A) debit to Inventory for $200, credit Accounts Payable for $200.
B) debit to Inventory for $200, credit Cost of Goods Sold for $200.
C) debit to Accounts Payable for $200, credit Inventory for $200.
D) debit to Accounts Payable for $200, credit Cash for $200.

Question 31

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

Question 32

Which of the following is NOT a main type of Special Journal?

A) Purchases Journal
B) Personnel Journal
C) Cash Receipts Journal
D) Cash Payments Journal

Question 33

Which special journal is used to record merchandise or other items bought on account?

A) Sales journal
B) Cash Receipts journal
C) Purchases journal
D) Cash Payments journal

Question 34

The accounts payable column total is posted to the accounts payable general ledger account at the end of the month.

Question 35

The seller issues a debit memorandum when granting a reduction in price to a customer.

Question 36

The Inventory account normally has a credit balance.

Question 37

On June 15, the Greater Gravel Company purchased $700 of merchandise on account from the Digga Ditch Company, terms 4/10, n/30. The goods were shipped F.O.B. shipping point. The freight charge of $40 was paid by Digga Ditch Company and added to the invoice. The amount to record in the Inventory account is

A) $700.
B) $740.
C) $672.
D) $712.

Question 38

On March 30, Bailey's Dog Bakery purchased $1,000 of merchandise on account from the Williams Company. The goods were shipped F.O.B. shipping point. The freight charge of $80 was paid by Williams Company and added to the invoice. The amount to record in the Accounts Payable account is

A) $1,000.
B) $990.
C) $1,080.
D) $1,070.

Question 39

Amounts are posted to the Accounts Payable Subsidiary Ledger

A) at the end of the month.
B) daily.
C) when financial statements are being prepared.
D) whenever the accountant has some spare time.

Question 40

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 41

Which of the following does NOT receive a copy of the Purchase Order?

A) Supplier
B) Customer
C) Accounting department
D) Department that initiated purchase requisition

Question 42

Credit terms of 2/10, n/30 mean that

A) 2% discount is allowed if the bill is paid within 10 days, or the entire amount is due within 30 days.
B) a discount is allowed if the bill is paid within 30 days.
C) a discount is allowed if the bill is paid after 10 days.
D) a 2% discount is allowed if the customer pays the bill within 30 days.

Question 43

Credit terms of n/15, EOM means that

A) if the bill is paid by the end of the month, a discount will be granted.
B) the bill is due 15 days before the end of the month.
C) if the bill is paid 10 days after the end of the month, a discount is allowed.
D) the bill is due 15 days after the end of the month and no discount is allowed.

Question 44

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

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

Question 45

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) F.O.B. seller.
D) F.O.B. purchaser.

Question 46

Accounts of a single type are kept in this ledger.

A) supplemental ledger.
B) additional ledger.
C) subsidiary ledger.
D) None of these answers are correct.

Question 47

Which is the correct order of buying merchandise from a company?

A) Approval for payment, order, requisition, invoice, receiving report
B) Approval for payment, requisition, order, invoice, receiving report
C) Requisition, order, invoice, approval for payment, receiving report
D) Requisition, order, invoice, receiving report, approval for payment

Question 48

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) purchase invoice.
D) debit memorandum.

Question 49

The purchases journal is used for

A) recording cash payments.
B) recording purchases of merchandise.
C) recording credit sales.
D) recording cash purchases.

Question 50

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

A) general ledger.
B) AP ledger.
C) AR ledger.
D) employee ledger.

Question 51

It is a requirement that all suppliers must provide identical credit terms.

Question 52

Accounts of a single type (i.e., Accounts Payable) are kept in this form of ledger.

A) Supplemental ledger
B) Employee ledger
C) Subsidiary ledger
D) General ledger

Question 53

Which of the following events does NOT require a journal entry to be made?

A) A supplier's invoice is received.
B) A purchase requisition is completed.
C) A purchase order is generated and delivered.
D) Both B and C are correct.

Question 54

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 55

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

A) credit terms.
B) net cash.
C) cash on demand.
D) gross cash.

Question 56

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 discount.
D) purchases returns.

Question 57

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 unpacks the goods.

Question 58

The term F.O.B. means

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

Question 59

The time a purchaser is granted to pay an invoice is the discount period.

Question 60

Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.

Question 61

Medeco bought goods for $150 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed within the discount period, what is the amount they should pay?

A) $100
B) $147
C) $98
D) $150

Question 62

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

Question 63

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 64

The purchasing department issues purchase orders.

Question 65

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) net income to be understated.
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 66

Defend the proposition that it is more important for a company to pay attention to its accounts receivable than to its accounts payable.

Question 67

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

Question 68

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

Question 69

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 70

FOB is short for Free On Board.

Question 71

When the terms are F.O.B. shipping point, the purchaser is responsible for the cost of shipping from the seller's shipping point to the purchaser's location.

Question 72

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 73

A purchase requisition form is completed by the accounts payable clerical staff.

Question 74

The entry to record a payment on a $500 account within the 2% discount period would include a

A) debit to Accounts Payable for $490.
B) debit to Accounts Payable for $500.
C) credit to Purchases for $510.
D) debit to Cash for $490.

Question 75

Jackson purchased $400 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) $360
B) $408
C) $400
D) $392

Question 76

Credit terms of 3/10, Net 30 permit a purchaser to deduct 3% of the invoice total if payment is made within 10 days.

Question 77

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

Question 78

Purchases discounts are usually an incentive for the customer to pay early.

Question 79

Medeco bought goods for $150 on credit. Medeco returned $50 worth of goods. Terms of the sale were 2/10, n/30. If Medeco pays the amount owed after the discount period, what is the amount they should pay?

A) $100
B) $147
C) $98
D) $150

Question 80

Jackson purchased $400 of goods on Feb 8 and received credit terms of 2/10, n/30. How much did he pay if payment was made on Feb 21?

A) $360
B) $408
C) $400
D) $392