1. Flynn Company purchased merchandise inventory with an invoice price of $5,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Flynn Company pays within the discount period?
a. $5,000
b. $4,900
c. $4,500
d. $4,600
2. In a perpetual inventory system, the amount of the discount allowed for paying for merchandise purchased within the discount period is credited to
a. Merchandise Inventory.
b. Purchase Discounts.
c. Purchase Allowance.
d. Sales Discounts.
3. As an incentive for customers to pay their accounts promptly, a business may offer its customers
a. a sales discount.
b. free delivery.
c. a sales allowance.
d. a sales return.
4. The credit terms offered to a customer by a business firm are 2/10, n/30, which means that
a. the customer must pay the bill within 10 days.
b. the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date.
c. the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.
d. two sales returns can be made within 10 days of the invoice date and no returns thereafter.
5. West Company has the following account balances:
Purchases $48,000
Sales Returns and Allowances 6,400
Purchase Discounts 4,000
Freight-in 3,000
Delivery Expense 4,000
The cost of goods purchased for the period is
a. $52,000.
b. $47,000.
c. $51,000.
d. $44,600.
6. The journal entry to record a return of merchandise purchased on account under a periodic inventory system would be
a. Accounts Payable
Purchase Returns and Allowances
b. Purchase Returns and Allowances
Accounts Payable
c. Accounts Payable
Inventory
d. Inventory
Accounts Payable
7. Cole Company has sales revenue of $39,000, cost of goods sold of $24,000 and operating expenses of $9,000 for the year ended December 31. Cole's gross profit is
a. $30,000.
b. $15,000.
c. $6,000.
d. $0.
8. Logan Company made a purchase of merchandise on credit from Claude Corporation on August 3, for $6,000, terms 2/10, n/45. On August 10, Logan makes the appropriate payment to Claude. The entry on August 10 for Logan Company is
a. Accounts Payable................................................................... 6,000
Cash............................................................................... 6,000
b. Accounts Payable................................................................... 5,880
Cash............................................................................... 5,880
c. Accounts Payable................................................................... 6,000
Purchase Returns and Allowances................................. 120
Cash............................................................................... 5,880
d. Accounts Payable................................................................... 6,000
Merchandise Inventory................................................... 120
Cash............................................................................... 5,880
9. Cartier Company purchased inventory from Pissaro Company. The shipping costs were $400 and the terms of the shipment were FOB shipping point. Cartier would have the following entry regarding the shipping charges:
a. There is no entry on Cartier's books for this transaction.
b. Freight Expense..................................................................... 400
Cash.............................................................................. 400
c. Freight-out............................................................................. 400
Cash.............................................................................. 400
d. Merchandise Inventory.......................................................... 400
Cash.............................................................................. 400
10. Inventories are defined by IFRS as
a. held-for-sale in the ordinary course of business.
b. in the process of production for sale in the ordinary course of business.
c. in the form of materials or supplies to be consumed in the production process or in the providing of services.
d. all of the above.