21 assume the periodic inventory system is used nicolla company sold inventory for c 4306828

21 assume the periodic inventory system is used nicolla company sold inventory for c 4306828

21) Assume the periodic inventory system is used. Nicolla Company sold inventory for cash of $6,000. A week later, the inventory was returned and a cash refund was given to the customer. Nicolla's journal entry to record the return of the inventory would be which of the following?

A) Cash 6,000

Accounts Receivable 6,000

B) Sales 6,000

Accounts Receivable 6,000

C) Sales Discounts 6,000

Cash 6,000

D) Sales Returns & Allowances 6,000

Sales 6,000

E) Sales Returns & Allowances 6,000

Cash 6,000

22) Wayne Company just purchased merchandise costing $700, which has payment terms of 2/10, n/45. Wayne Company is uncertain whether to take advantage of the discount. What is the annual interest rate implicit in the cash discount, assuming a 365-day year?

A) 2.0%

B) 3.0%

C) 16.2%

D) 20.9%

E) 21.3%

23) Payne Industries can borrow money from the local bank at 14%. The company just acquired inventory costing $2,900, which has terms of 2/10, n/30. Assuming a 365-day year, which of the following statements is true?

A) Do not pay within the discount period since the effective annual rate of the discount is 37.2%, while the cost to borrow money is 14%.

B) Pay within the discount period since the effective annual rate of the discount is 37.2%, while the cost to borrow money is 14%.

C) Do not pay within the discount period since the effective annual rate of the discount is 24%, while the cost to borrow money is 14%.

D) Pay within the discount period since the effective annual rate of the discount is 24%, while the cost to borrow money is 14%.

E) Do not pay within the discount period since the 2% discount is less than the 14% cost to borrow money.

24) Which of the following statements is true?

A) Trade discounts and sales returns and allowances are listed on the income statement as deductions from gross sales.

B) Reports to shareholders often omit the details of revenue and show only net revenue.

C) Cash Discounts on Sales are listed on the income statement as an expense of doing business.

D) “Turnover” is commonly used in the United States to refer to net sales revenue.

E) Cash discounts must appear on cash flow statements.

25) Higgins Company accepts bank cards, which charge a fee of 4% on sales. The company had gross sales of $60,000, of which 25% were cash sales and the remainder was credit sales that are solely attributable to bank cards. The company uses the periodic inventory system. Which of the following is the journal entry for Higgins Company?

A) Cash 58,200

Sales 58,200

B) Cash 15,000

Accounts Receivable 43,200

Sales 58,200

C) Cash 57,600

Cash discounts for Bank Cards 2,400

Sales 60,000

D) Cash 58,200

Cash Discounts for Bank Cards 1,800

Sales 60,000

E) Cash 15,000

Accounts Receivable 43,200

Cash Discounts on Bank Cards 1,800

Sales 60,000

26) Thompson Manufacturing sold inventory to a customer for $400. The customer used a VISA bank card, which charges Thompson a 3% fee. The company uses the periodic inventory system. What asset results from this sale?

A) Accounts Receivable of $388

B) Cash of $400

C) Cash of $388

D) Sales of $388

E) Accounts Receivable of $400

27) White Enterprises sold $100,000 of sales in January, but customers returned $10,000 of goods to White Enterprises during the month. In addition, White Enterprises gave cash discounts of $1,000 to its customers. The beginning balance of the allowance for uncollectible accounts was $2,000 and the company uses the aging of accounts receivable to account for uncollectible accounts. What is the net sales figure for the month of January for White Enterprises?

A) $89,000

B) $90,000

C) $92,000

D) $91,000

E) $100,000

28) For a newspaper subscription, subscription revenue is always credited when cash is received from the customer.

29) Revenue is generally recognized at the point of sale with a debit.

30) A sales return occurs when a buyer returns merchandise to the seller, and a sales allowance is when the seller allows a lower price to be charged to the customer.

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