Chapter 7

Question 1

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

Answer 1

Merchandising Business.

Question 2

The Sales Returns and Allowances account is classified as a?

Answer 2

Contra Revenue Account

Question 3

If Morgan Industries issued a Credit Memorandum 1204 on January 20 for a return of $400 merchandise purchased on account by Doug Bowen, plus 8% sales tax, the credit memorandum would total:

Answer 3

$432

Question 4

Assuming no sales tax is collected, a business credit card sale is recorded as a?

Answer 4

Debit to Accounts Receivable and a Credit to Sales.

Question 5

Suppose the list price of goods is $1000 and the trade discount is 20%. What is the amount of the discount and what is the net price the wholesaler records as sales?

Answer 5

$200;$800

Question 6

If an Invoice lists “2/10, n/30”, these numbers and letters are known as?

Answer 6

The credit terms.

Question 7

Connor Company sells merchandise for $2000 on account to Market Industries on January 21, at 1/10, n/30, Invoice 190. Market returns $200 of merchandise on January 23, receiving credit memorandum 120 from Connor. What amount would Market pay if they submit payment on January 29?

Answer 7

$1782

Question 8

Merchandise is sold on credit for $500 plus 6% sales tax. The entry in the journal will include a debit to Accounts Receivable for?

Answer 8

$530

Question 9

When a sales tax return is prepared, the amount of a firm’s taxable gross sales for the month are computed as?

Answer 9

Cash sales plus Credit sales less Sales Returns and Allowances.

Question 10

Sampson Company collected $1300 in sales taxes from customers in March 2010. Sampson is allowed to keep 1.5% of sales Tax collected. The journal entry to record the discount kept by Sampson would include?

Answer 10

Debit to Sales Tax Payable for $19.50 and a Credit to Miscellaneous Income for $19.50.