Q 101

The Sales Discounts account is classified as A) an asset account. B) a contra asset account. C) an expense account. D) a contra revenue account.

Q 102

As an incentive for customers to purchase a large number of items at one time, a business may offer its customers A) a sales discount. B) free delivery. C) a sales allowance. D) a quantity discount.

Q 103

As an incentive for customers to pay their accounts promptly, a business, in certain industries, may offer its customers A) a sales discount. B) free delivery. C) a sales allowance. D) a quantity discount.

Q 104

A sales return in a perpetual inventory system requires a A) debit to Merchandise Inventory and a credit to Accounts Payable. B) debit to Cost of Goods Sold and a credit to Merchandise Inventory. C) debit to Sales Revenue and a credit to Merchandise Inventory. D) debit to Sales Returns and Allowances and a credit to Accounts Receivable.

Q 105

Sales revenues are usually considered earned when A) cash is received from credit sales. B) an order is received. C) goods have been transferred from the seller to the buyer. D) adjusting entries are made.

Q 106

A sales invoice is a source document that A) provides support for goods purchased for resale. B) is required before a sale can be recorded. C) provides evidence of a sale. D) serves only as a customer receipt.

Q 107

Freight costs incurred by the seller on outgoing merchandise are recorded as A) freight out. B) merchandise inventory. C) freight-in. D) cost of goods sold.

Q 108

Freight costs incurred by the seller on outgoing merchandise is shown on the Income Statement as part of A) Cost of Goods Sold. B) Operating Expenses. C) Sales Revenue. D) Liabilities.

Q 109

A Sales Returns and Allowances account is NOT debited if a customer A) returns defective merchandise. B) receives a credit for merchandise of inferior quality. C) utilizes a prompt payment incentive. D) returns goods that are not in accordance with specifications.

Q 110

If a customer agrees to keep merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales A) discount. B) return. C) contra asset. D) allowance.

Q 111

The HST collected on a sale of merchandise is recorded as A) a selling expense. B) sales tax payable. C) sales revenue. D) cost of goods sold.

Q 112

When goods are returned that relate to a prior cash sale, A) the Sales Returns and Allowances account should not be used. B) the Cash account will be credited. C) Sales Returns and Allowances will be credited. D) Accounts Receivable will be credited.

Q 113

The Sales Returns and Allowances account does NOT provide information to management about A) possible inferior merchandise. B) the percentage of credit sales versus cash sales. C) inefficiencies in filling orders. D) errors in overbilling customers.

Q 114

A quantity discount is A) an incentive for customers to pay quickly. B) recorded as a contra revenue account. C) considered to be a sales allowance. D) a cash savings to the purchaser.

Q 115

Tidnish Company sells merchandise on account for $2,400 to Upper Cape Company. Upper Cape Company returns $800 (cost $500) of merchandise that was damaged, along with a cheque to settle the account. What entry does Tidnish Company make upon receipt of the cheque?

Q 116

Which of the following would be classified as a contra account? A) Sales B) Sales Returns and Allowances C) Merchandise Inventory D) Unearned Revenue

Q 117

Which of the following accounts has a normal credit balance? A) Sales Returns and Allowances B) Delivery Expense C) Sales D) Selling Expense

Q 118

Northend Electric returned to Southerby Inc. 5 damaged fuses. Southerby accepted the return and refunded the $200 Northend had paid for the order. To record this return, Southerby's accountant must A) debit Cash and credit Sales for $200. B) debit Sales and credit Cash for $200. C) debit Sales Returns and Allowances and credit Cash for $200. D) debit Sales Returns and Allowances and credit Accounts Receivable for $200.

Q 119

Freight costs paid by a seller on merchandise sold to customers will cause an increase A) in the selling expense of the buyer. B) in operating expenses for the seller. C) to the cost of goods sold of the seller. D) to a contra-revenue account of the seller.

Q 120

Using a perpetual inventory system, the respective normal account balances of Merchandise Inventory, Sales Returns and Allowances, and Cost of Goods Sold are A) credit, credit, credit. B) debit, debit, debit. C) debit, credit, credit. D) debit, debit, credit.

Q 121

When recording a credit sale in a perpetual inventory system, all of the following accounts are affected EXCEPT A) Sales Revenue. B) Accounts Receivable. C) Merchandise Inventory. D) Cash.

Q 122

When recording a return of a credit sale in a perpetual inventory system, all of the following accounts are affected EXCEPT A) Sales Returns and Allowances. B) Accounts Receivable. C) Merchandise Inventory. D) Cash.

Q 123

A company uses the Sales Returns and Allowances account to record A) a discount offered for a large quantity purchase. B) a discount received from a supplier to encourage prompt payment. C) returns of inventory to suppliers. D) customer returns of prior sales.

Q 124

On the income statement, a merchandiser would normally give a single sales figure (the sum of all its individual sales account) because A) companies do not want competitors to know the details of operating results. B) merchandisers only have one product available for sale. C) perpetual inventory systems cannot separate various sales items. D) it is too time consuming to separate all individual sales terms.

Q 125

If the seller delivers products FOB destination, what entry will it record? A) Freight Out Cash B) Freight In Cash C) Cost of Goods Sold Cash D) Inventory Cash

Q 126

If returned merchandise is not damaged and can be sold again, the seller must record two journal entries. What will the seller record as the second journal entry? A) Sales Returns and Allowances Accounts Receivable B) Accounts Receivable Sales C) Inventory Cost of Goods Sold D) Inventory Accounts Receivable

Q 127

Using a perpetual inventory system, if Shediac Video Store's accounting records show an ending inventory balance of $25,000 and a physical count shows a balance of $23,000, it is necessary to A) debit its inventory records. B) purchase additional inventory. C) remove the nonexistent inventory from its records. D) credit Cost of Goods Sold.

Q 128

Using a perpetual inventory system, if Sackville Harness Shop accounting records show an ending inventory balance of $43,000 and a physical count shows a balance of $45,000, it is necessary to A) debit your inventory records to adjust to actual. B) purchase additional inventory. C) credit sales. D) credit Purchase Returns and Allowances.

Q 129

The journal entry to record a shortage of inventory at the end of the accounting period is

Q 130

In a perpetual inventory system, the Merchandise Inventory account should equal the actual merchandise on hand A) at all times. B) only after the physical inventory account has occurred. C) only at the beginning of the accounting period. D) only at the end of the accounting period.

Q 131

All of the following accounts are closed at the end of the accounting period EXCEPT A) Sales Returns and Allowances. B) Freight Out. C) Cost of Goods Sold. D) Merchandise Inventory.

Q 132

When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do NOT agree with the physical count A) has an effect on Cost of Goods Sold. B) has no effect on Cost of Goods Sold. C) requires reporting a loss when actual is higher than records. D) requires reporting a gain when actual is lower than records.

Q 133

A physical inventory should be taken A) after every purchase of merchandise. B) after every sale. C) at or near the balance sheet date. D) only if a computer accounting system is used.