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Exam 10: Purchases and Cash Payments

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Question 21

Multiple Choice

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Merchandise Inventory is what type of account?

A) Liability
B) Asset
C) Equity
D) Contra-asset

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Question 22

Multiple Choice

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The entry to record returned merchandise to Vine Company is:

A) debit Merchandise Inventory; credit Accounts Receivable in the general ledger.
B) debit Accounts Payable; credit Supplies.
C) debit Accounts Payable/Vine Company in the accounts payable subsidiary ledger and debit Accounts Payable in the general ledger; credit Merchandise Inventory.
D) debit Merchandise Inventory; credit Accounts Payable.

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Question 23

True/False

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Purchase discounts are given to the buyer from the supplier for motivation to increase quantity purchased.

Returned merchandise for credit on account. The perpetual inventory system is in use. This will be recorded with:

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

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

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 that the account in which the account balance is reported.

The Bixby Co. had the following transactions involving the purchase of merchandise. Prepare the necessary general journal entries. Any applicable freight costs are prepaid by the seller. The perpetual inventory method is in use. -Prepare the necessary general journal entry for June 16. Purchased merchandise having a price of $9,000 from the Ajax Supply House on account with credit terms 2/10, n/30. Transportation terms F.O.B shipping point. The freight costs were $175. __________________________________________ __________ __________ __________________________________________ __________ __________ __________________________________________ __________ __________

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

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

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

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

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

The entry to record a payment on a $660 account within the 4% discount period would include a:

On June 15, Melo Park purchased merchandise for the race track. The invoice was for $6,000, terms 2/10, n/30. On June 20, Paradise Park returned $300 of merchandise for credit. On June 25, it paid the amount owed. Fill in the blanks below. a) The debit to Merchandise Inventory on June 15 is ________. b) The credit to Accounts Payable on June 15 is ________. c) The credit to Merchandise Inventory on June 20 is ________. d) The credit to Cash on June 25 is ________. e) The credit to Merchandise Inventory on June 25 is ________.

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.

The recording of the cost of freight-in under the perpetual inventory system would include a:

The Bixby Co. had the following transactions involving the purchase of merchandise. Prepare the necessary general journal entries. Any applicable freight costs are prepaid by the seller. The perpetual inventory method is in use. -Prepare the necessary general journal entry for June 28. __________________________________________ __________ __________ __________________________________________ __________ __________ __________________________________________ __________ __________

F.O.B. shipping point means:

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