Question

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Weston Jewelers uses the perpetual inventory system. On April 2, Weston sold merchandise with a cost of $6,000 for $9,000 to a customer on account with terms of 2/15, n/30. On April 4, the customer reported damaged goods, and Michelin granted a $1,000 sales allowance. On April 10, Weston received payment from the customer. Calculate the amount of net sales revenue. A) $8,000 B) $8,840 C) $7,840 D) $9,000 2) A company purchased inventory for $73,000 from a vendor on account, FOB shipping point, with terms of 4/10, n/30. The company paid the shipper $1,500 cash for freight in. The company paid the vendor nine days after the sale. If there was no beginning inventory, the cost of inventory would be _. (Assume a perpetual inventory system.) A) $74,500 B) $71,500 C) $68,580 D) $71,580 3) Avery, Inc. uses the periodic inventory system. On February 1, the corporation purchased inventory on account for $25,000. The terms of invoice were 3/10, n/30. The amount due was paid on February 9. Which of the following journal entries correctly records the payment in the books of Avery, Inc.? 25,000 A)Accounts Payable Cash 25,000 B) Accounts Payable | Merchandise Inventory Cash 25,000 T 7 50 24,250 25,000 C) Accounts Payable Purchase Discounts Cash 750 24,250 25,000 D) Accounts Payable Purchases 25,000 4) The terms of an invoice are 3/10, n/25. This means that a A) discount of 3 percent is allowed if the invoice is paid after 25 days B) discount of 25 percent is allowed if the invoice is paid within 10 days C) discount of 3 percent is allowed if the invoice is paid within 10 days D) discount of 10 percent is allowed if the invoice is paid within three days 5) FOB destination refers to a situation where title to goods while in transit belongs to the A) insurance agency B) seller C) buyer D) transport agency

Answer 1

Particulars Amount Sales $ 9,000 Less: Sales allowance $ 1,000 Sales after sales allowance $ 8,000 Cash discount ($8,000*2%) $ - 160 Net sales revenue $ 7,840 Hence, the correct option is: C) $7,840 $ 2) | Particulars Amount Purchases $ 73,000 Less: Cash discount ($73,000*4%) $ -2,920 Add: Freight-in $ 1,500 Cost of inventory $ 71,580 Hence, the correct option is:D) $71,580 Credit Debit 25,000 $ Account Titles and Explanation Accounts payable Purchases discount ($25,000*3%) Cash ($25,000-$750) Hecne, the correct option is C. $ 750 $ 24,250

The terms 3/10, n/25 means that payment should be made in 25 days and a cash discount of 3% is allowed if paid within 10 days from date of invoice. Hence, the correct option is C. In FOB destination sale, th eownership is passed to the buyer only when the goods are delivered to the buyer. If the goods are in transit, the title to goods still belongs to the seller. Hence, the correct option is B) Seller.