Question

1. Which of the following accounts usually has a debit balance?

	Purchase Discounts
	Sales Tax Payable
	Allowance for Doubtful Accounts
	Freight In

2. Isaac Co. sells merchandise on credit to Sonar Co in the amount of $9,600. The invoice is dated on April 15 with terms of 1/15, net 45. If Sonar Co. chooses not to take the discount, by when should Sonar make the payment?

	May 30
	May 15
	April 25
	None of the above.

3. Under the periodic inventory system, all purchases of merchandise are debited to the account entitled

	Purchases
	Cost of Merchandise Available for Sale
	Accounts Payable

4. The Corbit Corp. sold merchandise on account for, $7,200. Corbit Corp. utilizes the periodic inventory system. The cost of the merchandise sold was $3,950. The journal entry(s) to record this transaction would be

	Accounts Receivable                     7,200       Sales                                                  7,200 Cost of Merchandise Sold              3,950      Merchandise Inventory                         3,950
	Cash                                             7,200       Sales                                                   7,200 Cost of Merchandise Sold              7,200      Merchandise Inventory                         7,200
	Accounts Receivable                     7,200       Sales                                                  7,200

Answer 1

1) FRIEGHT IN.

- All of the given accounts have credit balance. Whereas, Freight in is the expense and have a debit expense.

2) MAY 30

- Sonar Co is allowed to take discount of 1% if it makes payment by April 30.

- if sonar co chooses not to take any discount, it should make the payment after the maturity date i.e., any date after May 15.

3) PURCHASES

- All purchases of merchandise under periodic inventory system is debited to purchases.

4) Journal entry :

- Account Receivable. $7200 Dr

Sales $7200 Cr

- Cost of merchandise sold. $3950 Dr

Merchandise inventory. $3950 Cr   

_____×_____

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