Chapter 4 Accounting for Merchandising Operations Quiz

What is the journal entry to record a purchase without cash discounts?

• Debit Merchandise Inventory, credit Cash

• Debit Cash, credit Accounts Payable

• Debit Accounts Payable, credit Cash

• Debit Cash, credit Merchandise Inventory

What does the term 'FOB shipping point' mean?

• The seller pays for the transportation costs

• The buyer pays for the transportation costs

• Ownership of the goods transfers to the buyer at the buyer's location

• Ownership of the goods transfers to the buyer at the seller's location

What is the journal entry to record a purchase without cash discounts?

• Debit Cost of Goods Sold, credit Accounts Receivable

• Debit Cash, credit Cost of Goods Sold

• Debit Merchandise Inventory, credit Cash

• Debit Cash, credit Accounts Receivable

What does the term 'FOB destination' mean?

• The seller pays for the transportation costs

• The buyer pays for the transportation costs

• Ownership of the goods transfers to the buyer at the buyer's location

• Ownership of the goods transfers to the buyer at the seller's location

What is a '2/10, n/ 30' credit term?

• A discount of 2% is available if payment is made within 10 days; otherwise, the full amount is due within 30 days.

• A discount of 10% is available if payment is made within 2 days; otherwise, the full amount is due within 30 days.

• A discount of 30% is available if payment is made within 10 days; otherwise, the full amount is due within 2 days.

• Payment must be made in two installments: 10% within the first 30 days and the remaining 90% in the following month.

Indicate the correct choice to complete the summary:

In summary, purchases are recorded as (debits/credits) to Merchandise Inventory. Purchases discounts, returns, and allowances are (debited/credited) to Merchandise Inventory. Transportation-in is (debited/credited) to Merchandise Inventory.

What does '2/15, n/60' mean in terms of payment terms?

• A 2% discount is offered if payment is made within 15 days; otherwise, the net amount is due within 60 days.

• A 15% discount is offered if payment is made within 2 days; otherwise, the net amount is due within 60 days.

• Payment can be made in two installments: 15% within the first 60 days and the remaining 85% in the following month.

• A 60% discount is offered if payment is made within 15 days; otherwise, the net amount is due within 2 days.

What is the effect on the accounting equation when inventory is purchased on credit?

• Assets increase, liabilities increase

• Assets decrease, liabilities decrease

• Assets increase, owner's equity decreases

• Assets decrease, owner's equity increases