Question

1. Company Yhad a beginning inventory on September 1 of $18,000. During the month they had made purchases of $30,000 but returned $2,000 of goods because they were defective. At the end of the month, the inventory on hand was valued at $9,500. What is the cost of goods available for sale? What are the cost of goods sold for the month? 2. When the totals of the sales journal are posted at the end of the month, there will be credits to a Sales and Merchandise Inventory and debits to Accounts Receivable and Cost of Goods Sold b. Accounts Receivable and cost of Goods Sold and debits to Sales and Merchandise Inventory c. Sales and debits to each individual customer account. d. the Sales account only, and no debits. 3. In the expanded purchases journal, debits are made in which columns? a. Accounts Payable, Merchandise Inventory, and Office Supplies b. Merchandise Inventory, Office Supplies, and Store Supplies C. Cash, Office Supplies, and Store Supplies d. Accounts Payable, Cash, and Merchandise Inventory 4. If a customer takes a sales discount, an entry is made in the a. cash receipts journal. b. sales journal. C. cash payments joumal. d. general journal 5. Company Z. on June 20 sells merchandise on account to Company A for $4,000, terms 2/10, i 36. On July 25 Company A. returns merchandise worth $400 to Company Z. On July 29 payment is received from Company A. for the balance due. What is the amount of cash received?

Answer 1

(1): Cost of goods available for sale = beginning inventory + net purchases = 18,000 + (30,000 – 2,000) = 46,000

Cost of goods sold = Cost of goods available for sale – ending inventory = 46,000 – 9,500 = 36,500

(2): Here the correct option is “a” – sales and merchandise inventory and debits to accounts receivable and cost of goods sold.

Explanation: This entry will close all the accounts properly and ensure that double entry principle is adhered to.

(3): The answer is option “b” – merchandise inventory, office supplies, and store supplies.

(4): Here the correct option is “a” – cash receipts journal.

(5): Total sale = $4,000. Return = 400 and so amount due = 4000-400 = $3,600

The terms are 2/10, n/30 and this means that if payment is done within 10 days then a discount of 2% will be given. Here payment is done on July 29^th and this after 1 month and 9 days (July 29 to June 20 = 1 month 9 days). Thus cash received = $3,600 (as no discount will be given).