Q: Which of the following is the correct formula for calculating a trade discount?

$$Trade\ Discount = List\ Price \times Discount\ \%$$

Question 1

Which of the following best describes the primary purpose of special journals in a merchandising business?

Accepted Answer

To simplify and organize the recording of frequent, similar transactions such as sales on account and cash receipts.

Question 2

A retailer purchases 20 bicycles at a list price of $200 each with a 30% trade discount. What is the total amount recorded in the books for this purchase?

Accepted Answer

$2,800

Question 3

Which equation correctly calculates Net Sales?

Accepted Answer

$$Net\ Sales = Sales - Sales\ Returns\ \&\ Allowances - Sales\ Discounts$$

Question 4

A customer receives an invoice for $1,000 with terms 2/10, n/30. If the customer pays within the discount period, how much will they pay?

Accepted Answer

$$980$$

Question 5

Which of the following is NOT recorded in the sales journal?

Accepted Answer

Sales of merchandise for cash

Question 6

At the end of the month, the total of all customers’ ending balances in the accounts receivable subsidiary ledger should:

Accepted Answer

Equal the ending balance in the Accounts Receivable control account in the general ledger.

Question 7

Which account is credited when a credit memorandum is issued for returned merchandise?

Accepted Answer

Accounts Receivable

Question 8

A company sold 5 keyboards for $$40 each on account. The cost per keyboard is 25. $$What is the journal entry to record the sale under a perpetual inventory system?

Accepted Answer

Debit Accounts Receivable $$200; Credit Sales 200$$; Debit Cost of Goods Sold $$125; Credit Inventory 125$$

Question 9

Which of the following best describes a subsidiary ledger?

Accepted Answer

A ledger that contains accounts of a single type, such as all accounts receivable.

Question 10

If a customer returns merchandise originally sold for $$100 (cost 60$$), what is the correct journal entry for the return under a perpetual inventory system?

Accepted Answer

Debit Sales Returns & Allowances $$100; Credit Accounts Receivable 100$$; Debit Inventory $$60; Credit Cost of Goods Sold 60$$

Question 11

Which of the following is a contra-revenue account?

Accepted Answer

Sales Returns & Allowances

Question 12

A company receives a cheque from a customer for $$1,000 in settlement of an invoice, less a 50 $$sales return and a 2% sales discount. What is the amount of cash received?

Accepted Answer

$$931$$

Question 13

Which journal would you use to record the receipt of cash from a customer who paid an invoice within the discount period?

Accepted Answer

Cash Receipts Journal

Question 14

What is the main advantage of using a perpetual inventory system over a periodic inventory system?

Accepted Answer

It provides timely and accurate inventory information, especially with POS systems.

Question 15

Which of the following transactions would NOT be recorded in the cash receipts journal?

Accepted Answer

Cash paid to suppliers

Question 16

A company’s gross sales for the month are $$10,000. Sales returns and allowances are 500$$, and sales discounts are $200. What are net sales for the month?

Accepted Answer

$$9,300$$

Question 17

Which of the following best describes the function of a credit memorandum?

Accepted Answer

It is sent by the seller to a customer who has returned merchandise, indicating a reduction in the amount owed.

Question 18

If a company’s accounts receivable control account does NOT match the total of the subsidiary ledger, what is the most likely cause?

Accepted Answer

A transaction was posted to the control account but not to the subsidiary ledger, or vice versa.

Question 19

Which of the following is the correct formula for calculating a trade discount?

Accepted Answer

$$Trade\ Discount = List\ Price 	imes Discount\ \%$$

Question 20

A schedule of accounts receivable is prepared to:

Accepted Answer

Verify the accuracy of the posting process and assist in collections.

Special Journals and Subsidiary Ledgers: Sales and Cash Receipts Journals – Chapter 6 Study Notes

Study Guide - Practice Questions

Study Guide - Flashcards