PAL Session 9/25: Chapter 3

This company sells good to the final consumer

• retail companies

• wholesale companies

• Manufacturing companies

This company sells to other businesses

• Retail companies

• Wholesale companies

• Manufacturing companies

On February 1st Z Company sold $450,000 of merchandise to W company. on account. The cost of merchandise sold was $215,000. What accounting entry would be made for Z company?

• Inventory increases $215,000, accounts payable increases $215,000

• Accounts receivable increases $450,000, Revenue increases $450,000, inventory decreases $215,000, Cost of goods sold (expense)increases $215,000

• Accounts receivable increases $215,000, revenue increases $215,000, inventory decreases $450,000, cost of goods sold (expense) increases $450,000

• Inventory decreases $215,000, cash decreases $215,000, accounts receivable increases $450,000, revenue increases $450,000

On February 3rd, W Company returned $70,000 worth of merchandise purchased on February 1st to Z Company. The cost of the merchandise returned was $45,000. What accounting entry would be made for Z company?

• Accounts receivable decreases $45,000, allowance for doubtful accounts increases $45,000 (contra revenue account), inventory increases $70,000, accounts payable increases $70,000

• Inventory decreases $45,000, accounts payable decreases $45,000

• Accounts receivable decreases $70,000, Allowance for doubtful accounts increases $70,000 (contra revenue account), inventory increases $45,000, cost of goods sold decreases $45,000

• Cost of goods sold increases $70,000, inventory increases $70,000

Theta Corporation provides this information for the month ended April 30th, 2023.

Sales on credit are $315,480

Cash sales are $136,778

Sales discounts are $6,572

Sales returns and allowances are $9,600

What are their net sales?

• $455,286

• $194,874

• $162,530

• $436,086

Z Company purchased merchandise inventory with an invoice price of $12,850 and credit terms of 2/10, n/30. What is the net cost of goods if Z Company pays within the discount period?

• $257

• $12,593

• $11,360

• $12,850

A credit sale of $7,440 is made on July 1st, terms 2/10, n/30. A return of $920 is granted on July 5th. What amount is received as payment in full on July 8th?

• $6,389.60

• $6,371.20

• $6,520

• $8,192,80

On March 1st, Z company sold $310,000 of merchandise to X Company. The cost of merchandise sold was $208,000. What accounting entry would be made for X company?

• Accounts receivable increases $208,000, revenue increases $208,000, inventory decreases $310,000, cost of goods sold increases $310,000

• Accounts receivable increases $310,000, revenue increases $310,000, inventory decreases $208,000, cost of goods sold increases $208,000

• Inventory increases $310,000, accounts payable increases $310,000

• Inventory increases $208,000, cash decreases $208,000

On March 4th, X company returned $36,000 worth of merchandise to Z Company. The cost of merchandise returned was $20,000. What accounting entry would be made for X Company?

• Inventory decreases $36,000, accounts payable decreases $36,000

• Accounts receivable decreases $36,000, allowance for doubtful accounts increases $36,000, inventory increases $20,000, cost of goods sold increases $20,000

• Accounts receivable decreases $20,000, allowance for doubtful accounts increases $20,000, inventory increases $36,000, cost of goods sold increases $36,000

• Inventory decreases $20,000, cash increases $20,000

Which of the following is NOT true about perpetual inventory systems?

• Inventory is increased for merchandise purchased

• inventory is decreased for merchandise sold

• Inventory is adjusted continually throughout the accounting period

• Inventory is increased for merchandise sold