Chapter 6 2 marks

A customer takes advantage of a 2 percent sales discount on a $400 purchase. The entry made by the customer to record payment is:

A. Debit Accounts Payable, $392, credit Cash, $392.

B. Debit Accounts Payable, $400, credit Sales Discounts $8, credit Cash, $392.

C. Debit Accounts Payable, $400, credit Purchases Discounts $8, credit Cash, $392

D. Debit Purchases Discounts, $392, credit Cash, $392

Reconstruct your work in T-accounts firstly for Credit Purchase and then Payment in the frame of this Purchase;

Support your answer with theoretical explanations;

Chapter 8

(1) 4 marks

The Inventory, Purchases, and Sales of a Company for March follow. The Company closes its books at the end of each month and uses a Perpetual Inventory System.

Units Cost per unit

March 1^st Beginning Inventory 60 units $49

10^th Purchase 100 units $52

19^th Sale 90 units

31^st Ending Inventory 70 units

(a)

Compute the Costs of Ending Inventory and Costs of Goods Sold on March 31

using the average-cost method. Round unit costs to cents and totals to dollars;

(b)

Compute the Cost of Ending Inventory and Costs of Goods Sold on March 31

using the FIFO method;

(c)

Compute the Cost of Ending Inventory and Costs of Goods Sold on March 31

using the LIFO method;

(2) For an extra mark!

Which of the following statements is not correct?

1. Under a perpetual inventory system, a continuous record of quantities and costs of merchandise is maintained as sales and purchases are made.

2. Under a perpetual inventory system, cost of goods sold is determined by deducting the cost of ending inventory from the cost of goods available for sale.

3. Under a periodic inventory system, only the ending inventory is counted and priced.

4. Pricing of inventory and cost of goods sold using the specific identification method is the same under both the periodic and perpetual systems.