11 neslund ornamentals offered a 2 trade discount to parsons retail outlet for all p 4307171

11 neslund ornamentals offered a 2 trade discount to parsons retail outlet for all p 4307171

11) Neslund Ornamentals offered a 2% trade discount to Parsons Retail Outlet for all purchases over $200,000. Parsons Retail Outlet purchased $300,000 from Neslund Ornamentals on account. Neslund uses the periodic inventory system. Which of the following is the journal entry made by Neslund Ornamentals to recognize the sale and the 2% trade discount?

A) Accounts Receivable $294,000

Sales $294,000

B) Accounts Receivable $300,000

Sales Returns and Allowances $6,000

Sales $294,000

C) Sales Returns and Allowances $294,000

Sales $294,000

D) Sales $294,000

Accounts Receivable $300,000

Trade Discounts $6,000

E) Sales $294,000

Accounts Receivable $294,000

12) A company offers a 2% discount on payments received within 10 days of the invoice date. Otherwise full payment must be received within 30 days of the invoice date. If the invoice date is January 5, the payment date is January 13, and the company received the invoice on January 7, what is the amount that should be remitted assuming a gross sale of $1,000?

A) $200

B) $1,000

C) $1,020

D) $980

E) $196

13) Companies that offer cash discounts for prompt payment and use the gross method to account for them journalize the discount by

A) deducting the discount from the gross accounts receivable account.

B) using a separate account called Cash Discounts on Sales.

C) using a separate account called Trade Discounts on Sales.

D) adding the discount to the gross accounts receivable account.

E) deducting the discount from the revenue account.

14) In contrast to the gross method, the net method of accounting for cash discounts uses an ________ account.

A) Interest Revenue

B) Interest Expense

C) Cash Discounts on Sales

D) Cash Discounts for Bank Card

E) None of the above

15) Casper Company sold inventory of $5,000 and accepted payment with a credit card. The credit card charges Casper Company a 2% fee on credit card sales. Casper uses the periodic inventory system. Which of the following journal entries reflects the sale made by Casper Company?

A) Cash $5,000

Sales $5,000

B) Cash $4,900

Cash discounts for credit cards $100

Sales $5,000

C) Cash discounts for credit cards $4,900

Sales $4,900

D) Accounts receivable $5,000

Sales $5,000

E) Accounts receivable $4,900

Trade discounts for credit cards $100

Sales $5,000

16) What is one possible reason why the account Sales Returns and Allowances needs to be established as a contra account?

A) So that managers can keep a running balance of returned goods in order to be able to sell the damaged goods to the employees of the organization as an incentive

B) So that managers can produce more goods when goods get returned in order to hit monthly bonus levels

C) So that managers can make adjustments to the manufacturing process when goods are returned for defective reasons

D) So that factory foremen can manage when invoices are paid

E) So that factory foremen can control the amount of credit they grant customers

17) Assume the periodic inventory system is used. Madison Manufacturing gave a 4% trade discount to Tristan Company when it sold inventory for cash that normally sells for $12,000. Which of the following is the journal entry to be made by Madison Manufacturing?

A) Cash 11,520

Sales 11,520

B) Cash 11,520

Trade Discount 480

Sales 12,000

C) Cash 11,520

Trade Discount Payable 480

Sales 12,000

D) Cash 12,000

Trade Discount 480

Sales 11,520

E) Cash 12,000

Trade Discount Receivable 480

Sales 11,520

18) Assume the periodic inventory system is used. Krinkle Company sold inventory on account for $500 on May 8, 20X3, with terms of 2/10, n/30. On May 16, 20X3 the appropriate payment was received from the customer. Which of the following is the journal entry to record the May 16 transaction on Krinkle's books?

A) Cash 500

Accounts Receivable 500

B) Cash 490

Cash Discounts on Sales 10

Accounts Receivable 500

C) Cash 490

Sales 10

Accounts Receivable 500

D) Cash 500

Cash Discounts on Sales 10

Accounts Receivable 490

E) Cash 500

Sales 10

Accounts Receivable 490

19) Trade discounts

A) apply one or more reductions to the gross selling price for a particular class of customers in accordance with a company's policies.

B) are offered in order to be competitive.

C) are offered to encourage certain customer behavior (to encourage early orders).

D) are not reported on the income statement

E) All of the above statements are true regarding trade discounts.

20) Assume the periodic inventory system is used. Sammy Company sold inventory on account for $300. A week later, the inventory was returned and a full credit was given to the customer. Which of the following would be Sammy's journal entry to record the return of the inventory?

A) Cash 300

Accounts Receivable 300

B) Sales 300

Accounts Receivable 300

C) Sales Discounts 300

Accounts Receivable 300

D) Sales Returns & Allowances 300

Sales 300

E) Sales Returns & Allowances 300

Accounts Receivable 300

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