Analyzing Sales and Cash Receipts

For each of the following items, select the choice in theAnswerscolumn that best completes the statement.

1. When merchandise is sold on account and sales tax is also collected, (A)Accounts Receivable is credited for the total sale and sales tax. (B)the Accounts Receivable balance is increased. (C)Sales is debited for the price of the goods. (D)the sales tax is not reported.

2. Marris Company records a $1,000.00 sale on account on May 23. On June 6, the customer pays the account. The sale should be recorded in the (A)sales journal on May 23. (B)cash receipts journal on May 23. (C)sales journal on June 6. (D)cash receipts journal on June 6.

3. For a sale on account of $1,000.00 plus sales tax of $80.00, the amount recorded in the Accounts Receivable column of a sales journal is (A)$1,080.00. (B)$1,000.00. (C)$920.00. (D)$80.00.

4. The amount of sales tax on a sale is calculated as the price of goods (A)plus the sales tax rate. (B)times the sales tax rate. (C)minus the sales tax rate. (D)divided by the sales tax rate.

5. A business should post sales on account transactions to the accounts receivable subsidiary ledger frequently to (A)ensure the customer is invoiced for the sale. (B)avoid errors in posting. (C)follow generally accepted accounting principles. (D)ensure each customer account will show an up-to-date balance.

6. The amount of cash received for a sale on account of $1,080.00 when the cash is received within the 2% discount period is (A)$1,080.00. (B)$1,062.00. (C)$1,058.40. (D)$1,053.60.

7. Most businesses receive cash for credit and debit card sales (A)at the end of the business day. (B)by the start of the next business day. (C)within 2-3 days after batching out. (D)on the first day of the next month.

8. Credit terms of 2/10, n/30 means that if the account is paid in (A)2 days, a 10% discount will be allowed. (B)10 days, a 2% discount will be allowed. (C)10 days, a 30% discount will be allowed. (D)30 days, a 2% discount will be allowed.