ch05_tb_so3 - CHAPTER 5 Test Bank: Study Objective 3...

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Unformatted text preview: CHAPTER 5 Test Bank: Study Objective 3 TRUE-FALSE STATEMENTS AND SOLUTIONS 24. Cash register tapes provide evidence of credit sales. 25. The Sales Returns and Allowances account and the Sales Discount account are both classified as expense accounts. 26. The revenue recognition principle applies to merchandising companies by recognizing sales revenues when they are earned. 27. Sales Allowances and Sales Discounts are both designed to encourage customers to pay their accounts promptly. 28. Sales Discounts is a contra revenue account to Sales. 29. The normal balance of Sales Returns and Allowances is a credit. 30. When the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period. 31. Sales Discounts and Sales Returns and Allowances both have normal debit balances. 32. Merchandise is sold for $5,000 with terms 1/10, n/30. If $1,000 of the merchandise is returned prior to payment and the invoice is paid within the discount period, the amount of the sales discount is $40. Answers to True-False Statements 1. T 9. T 17. T 25. F 33. F 41. T 49. F 2. F 10 F 18. T 26. T 34. T 42. T 50. T 3. F 11. F 19. F 27. F 35. T 43. F 51. F 4. T 12. F 20. F 28. T 36. T 44. F 52. F 5. F 13. T 21. T 29. F 37. F 45. T 6. T 14. T 22. T 30. T 38. F 46. T 7. T 15. T 23. F 31. T 39. F 47. T 8. F 16. T 24. F 32. T 40. F 48. T MULTIPLE CHOICE QUESTIONS AND SOLUTIONS 104. 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. 105. Sales revenue a. may be recorded before cash is collected. b. will always equal cash collections in a month. c. only results from credit sales. d. is only recorded after cash is collected. 106. The journal entry to record a credit sale is a. Cash Sales b. Cash Service Revenue c. Accounts Receivable Sales Returns and Allowances d. Accounts Receivable Sales 107. Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a. debit Merchandise Inventory and credit Cost of Goods Sold. b. debit Cost of Goods Sold and credit Purchases. c. debit Cost of Goods sold and credit Merchandise Inventory. d. make no additional entry until the end of the period. 108. When sales of merchandise are made for cash, the transaction may be recorded by the following entry a. debit Sales, credit Cash b. debit Cash, credit Sales c. debit Sales, credit Cash Discounts d. debit Sales, credit Sales Returns and Allowances 109. The entry to record a sale of $600 with terms of 2/10, n/30 will include a a. debit to Sales Discounts for $12. b. debit to Sales for $588....
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ch05_tb_so3 - CHAPTER 5 Test Bank: Study Objective 3...

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