College Accounting A Practical

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College Accounting, Cdn. Ed., 12e (Slater)
Chapter 6 Special Journals - Part 1 Sales and Cash Receipts

6.1 The Need for Special Journals

1) The main reason most businesses do not use only a General Journal is
A) a General Journal is much too inefficient.
B) a General Journal is prone to many errors.
C) two or more clerks cannot use the General Journal at the same time.
D) both A and C are correct.
Answer: D
Diff: 2 Type: MC
Objective: 6-1

2) Which of the following is NOT a main type of Special Journal?

A) Sales Journal
B) Personnel Journal
C) Cash Receipts Journal
D) Cash Payments Journal
Answer: B
Diff: 1 Type: MC
Objective: 6-1

3) The arrangements between buyer and seller as to when payments for merchandise are to be made are
called
A) credit terms.
B) net cash.
C) cash on demand.
D) gross cash.
Answer: A
Diff: 1 Type: MC
Objective: 6-1

4) Net sales equal

A) gross sales.
B) gross sales - sales returns and allowances.
C) gross sales - sales returns and allowances - sales discounts.
D) sales discounts.
Answer: C
Diff: 2 Type: MC
Objective: 6-1

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5) Steps taken to reduce losses from credit sales do NOT include
A) Investigating each customer's credit rating.
B) Monthly reconciliation of the company bank account.
C) Allowing a cash discount for prompt payment.
D) Prompt follow up investigation when expected payments are not received.
Answer: B
Diff: 2 Type: MC
Objective: 6-1

6) Accounts of a single type are kept in this ledger.

A) supplemental ledger.
B) additional ledger.
C) subsidiary ledger.
D) None of these answers are correct.
Answer: C
Diff: 1 Type: MC
Objective: 6-1

7) The principal ledger containing all the balance sheet and income statement accounts is the
A) general ledger.
B) creditors' ledger.
C) customers' ledger.
D) subsidiary ledger.
Answer: A
Diff: 2 Type: MC
Objective: 6-1

8) Which account is used by management to keep track of possible customer dissatisfaction?

A) Sales Returns and Allowances
B) Sales Discount
C) Sales
D) Cost of Goods Sold
Answer: A
Diff: 1 Type: MC
Objective: 6-1

9) Credit terms of n/10, EOM means that

A) if the bill is paid by the end of the month, a discount will be granted.
B) the bill is due 10 days before the end of the month.
C) if the bill is paid 10 days after the end of the month, a discount is allowed.
D) the bill is due 10 days after the end of the month and no discount is allowed.
Answer: D
Diff: 2 Type: MC
Objective: 6-1

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10) Credit terms of 1/10, n/30 mean that
A) 1% discount is allowed if the bill is paid within 10 days, or the entire amount is due within 30 days.
B) a discount is allowed if the bill is paid within 30 days.
C) a discount is allowed if the bill is paid after 10 days.
D) a 1% discount is allowed if the customer pays the bill within 30 days.
Answer: A
Diff: 2 Type: MC
Objective: 6-1

11) Accounts of a single type (i.e., Accounts Receivable) are kept in this form of ledger.
A) supplemental ledger
B) additional ledger
C) subsidiary ledger
D) general ledger
Answer: C
Diff: 2 Type: MC
Objective: 6-1

12) When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the
A) master account.
B) subsidiary account.
C) receivable account.
D) controlling account.
Answer: D
Diff: 1 Type: MC
Objective: 6-1

13) The sales journal is used for

A) recording cash receipts.
B) recording purchases of merchandise.
C) recording credit sales.
D) recording cash sales.
Answer: C
Diff: 1 Type: MC
Objective: 6-1

14) The most important of several ways that a sales journal can be customized is
A) by adding columns for various categories of sales types.
B) by capturing details of sales by salesperson.
C) by adding details such as date of sale.
D) both A and B are correct.
Answer: D
Diff: 2 Type: MC
Objective: 6-1

15) The time a customer is granted to pay the bill is the discount period.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-1

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16) It is a requirement that all customers have identical credit terms.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-1

17) The decision to allow a customer credit terms is sometimes risky.

Answer: TRUE
Diff: 1 Type: TF
Objective: 6-1

18) Terms of 2/10, n/30 means that a customer is allowed a 10% discount in 30 days.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-1

19) Adding details of sales by salesperson to the sales journal allows easier calculation of sales
commissions.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-1

20) The Payroll Journal is not considered a special journal.

Answer: FALSE
Diff: 1 Type: TF
Objective: 6-1

21) Sales discounts are usually not an incentive for the customer to pay early.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-1

22) Gross Sales equals all the cash and credit sales made by a business for a specific period.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-1

23) Credit terms whereby the customer is granted credit until the 10th day of the following month are
n/10, EOM.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-1

24) Credit terms remain the same from company to company.

Answer: FALSE
Diff: 2 Type: TF
Objective: 6-1

25) Credit terms of 3/10 permit the customer to deduct 3% of the sale if payment is made within 10 days.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-1

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26) Distinguish between a cash discount and a trade discount.
Answer: A cash discount is offered primarily as an incentive to a customer to pay invoices promptly.
While the amount of discount may seem small (2% is very common), the annual interest rate is
substantial and many customers will take advantage of it, thereby both speeding up collections, as well as
minimizing losses due to bad debts.

A trade discount on the other hand is a device often used to permit a seller to publish a price list of their
"suggested" selling prices at retail, and then adjust the actual invoice prices to each customer as
appropriate. For example - larger customers may be awarded a larger trade discount to recognize their
more important status. It can also be used to accommodate special terms as for example often seen in
dealings with governments and educational institutions.
Diff: 2 Type: ES
Objective: 6-1

27) If cash flow is so important to merchandisers, why do they extend credit to their customers?
Answer: A customer who is limited to making only cash purchases will buy less than when credit is
available.
Diff: 2 Type: ES
Objective: 6-1

28) Compare and discuss a discount period versus a credit period.

Answer: A credit period is the length of time allowed for payment of goods sold on account.
Customers are encouraged to pay their bills within this time frame to maintain a good credit rating.

A discount period is shorter than the credit period to encourage early payment of bills. Customers are
given an incentive to make payments shortly after invoicing.

Terms such as 2/10, n/30 demonstrates the discount period and the credit period. The discount period is
10 days and the credit period is 30 days. If the customer pays the bill within 10 days, the customer will
receive a 2% discount, or the balance is due in full if the customer pays the bill within 30 days.
Diff: 2 Type: ES
Objective: 6-1

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6.2 Recording and posting sales transactions.

1) Merchants who buy goods at distributor's prices for resale to their customers may be known as
A) merchandisers.
B) retailers.
C) distributors.
D) All of the above are correct.
Answer: D
Diff: 1 Type: MC
Objective: 6-2

2) The sales journal is used for

A) recording cash receipts.
B) recording purchases of merchandise.
C) recording credit sales.
D) recording cash sales.
Answer: C
Diff: 1 Type: MC
Objective: 6-2

3) Kristi's pottery sold 250 tiles at $25.00 each to a charge customer, terms 1/10, n/30. Which entry is
required to record this transaction?
A) Debit Cash for $6,250; credit Tile Sales for $6,250
B) Debit Accounts Receivable for $6,187.50; credit Tile Sales for $6,187.50
C) Debit Accounts Receivable for $6,187.50; debit Sales Discount for $62.50, and credit Tile Sales for $6,250
D) Debit Accounts Receivable for $6,250; credit Tile Sales for $6,250
Answer: D
Diff: 3 Type: MC
Objective: 6-2

4) Lisa's Blankets and Bedding had a sale of $375 to a charge customer, terms 1/15, n/30. Lisa should
record this transaction as follows:
A) debit Accounts Receivable $375; credit Sales $375.
B) debit Cash $375; credit Sales $375.
C) debit Accounts Receivable $371.25; debit Sales Discounts $3.75; credit Sales $375.
D) debit Sales $375; credit Accounts Receivable $375.
Answer: A
Diff: 2 Type: MC
Objective: 6-2

5) Sold merchandise on account would be recorded with

A) a debit to an asset account.
B) a debit to a liability account.
C) a debit to Capital.
D) None of these are correct.
Answer: A
Diff: 1 Type: MC
Objective: 6-2

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6) Accounts of a single type are kept in this ledger.
A) supplemental ledger.
B) additional ledger.
C) subsidiary ledger.
D) None of these answers are correct.
Answer: C
Diff: 1 Type: MC
Objective: 6-2

7) When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the
A) master account.
B) subsidiary account.
C) receivable account.
D) controlling account.
Answer: D
Diff: 1 Type: MC
Objective: 6-2

8) The principal ledger containing all the balance sheet and income statement accounts is the
A) general ledger.
B) creditors' ledger.
C) customers' ledger.
D) subsidiary ledger.
Answer: A
Diff: 2 Type: MC
Objective: 6-2

9) The main difference between a sales journal and a multi-column sales journal is
A) the sales journal has fewer columns.
B) a multi-column sales journal is only used by very large companies.
C) the sales journal is harder to post at month end.
D) a multi-column sales journal makes income tax reporting a lot easier.
Answer: A
Diff: 2 Type: MC
Objective: 6-2

10) Entries to customers' accounts for credit sales are posted in the
A) accounts receivable subsidiary ledger.
B) accounts payable subsidiary ledger.
C) fixed asset subsidiary ledger.
D) cash subsidiary ledger.
Answer: A
Diff: 2 Type: MC
Objective: 6-2

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11) A checkmark in the PR column in the general journal means
A) the entry was recorded correctly.
B) the amount was posted to the controlling account.
C) the amount was recorded in the subsidiary ledger.
D) the entry was audited.
Answer: C
Diff: 1 Type: MC
Objective: 6-2

12) The normal balance of the accounts receivable subsidiary ledger is

A) credit.
B) debit.
C) It does not have a normal balance.
D) Not enough information provided.
Answer: B
Diff: 1 Type: MC
Objective: 6-2

13) Accounts of a single type (i.e., Accounts Receivable) are kept in this form of ledger.
A) supplemental ledger.
B) additional ledger.
C) subsidiary ledger.
D) general ledger.
Answer: C
Diff: 2 Type: MC
Objective: 6-2

14) The main reason a business might want to use a multi-column sales journal is
A) tt provides added information for making decisions.
B) Canada's Income Tax laws require it.
C) desire to know more about sales by salesperson.
D) Both A and C are good reasons.
Answer: D
Diff: 3 Type: MC
Objective: 6-2

15) When using a subsidiary ledger, the Accounts Receivable account in the general ledger is called the
A) master account.
B) subsidiary account.
C) receivable account.
D) controlling account.
Answer: D
Diff: 1 Type: MC
Objective: 6-2

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16) When merchandise is sold on account, it is usually recorded in the
A) cash receipts journal.
B) purchases journal.
C) sales journal.
D) cash payments journal.
Answer: C
Diff: 1 Type: MC
Objective: 6-2

17) Recording to the accounts receivable ledger is done

A) daily.
B) monthly.
C) bi-weekly
D) when requested.
Answer: A
Diff: 1 Type: MC
Objective: 6-2

18) The purpose of the accounts receivable subsidiary ledger includes all of the following but
A) to keep a running balance of creditor's accounts.
B) to keep a running balance of each customer's account.
C) to provide supporting information for the general ledger control account.
D) to provide information to help collect the customer's account.
Answer: A
Diff: 1 Type: MC
Objective: 6-2

19) Which of the following is a possible description for a mulri-column sales journal?
A) Cameras; Lenses and Accessories
B) Sports; Casual and Formal Footwear
C) Cookies; Cakes and Doughnuts
D) All of the above are possible examples.
Answer: D
Diff: 1 Type: MC
Objective: 6-2

20) Which of the following statements about subsidiary ledgers is MOST accurate?
A) The subsidiary ledger accounts will never equal the control account in the general ledger.
B) The accounts receivable ledger is a book of accounts that provides supporting detail for Accounts
Receivable.
C) The subsidiary ledger accounts will equal the amount in the Sales account.
D) The subsidiary ledger account will equal the amount in the sales account less sales discounts.
Answer: B
Diff: 2 Type: MC
Objective: 6-2

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21) What does a check mark in the PR column of a journal indicate?
A) An amount has been posted to the general ledger.
B) During the month the subsidiary ledger is updated.
C) An amount has been posted to the controlling account.
D) Nothing has to be posted until the end of the month for this transaction.
Answer: B
Diff: 2 Type: MC
Objective: 6-2

22) Sales is a revenue account.

Answer: TRUE
Diff: 1 Type: TF
Objective: 6-2

23) An example of a subsidiary ledger is the accounts receivable ledger.

Answer: TRUE
Diff: 1 Type: TF
Objective: 6-2

24) Cross-adding a multi-column sales journal is usually done only at month end.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-2

25) The controlling account is found in the subsidiary ledger and it summarizes or controls the general
ledger account.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-2

26) When you record the entry to the subsidiary ledger and place the checkmark in the PR column, it is
not necessary to post to the Accounts Receivable controlling account.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-2

27) Proving the accuracy of entering transactions in the multi-column sales journal is done by
crossfooting.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-2

28) Individual credit customer accounts are kept in the general ledger.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-2

29) Gross Sales equals all the cash and credit sales made by a business for a specific period.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-2
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30) A multi-column sales journal requires more postings at month end.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-2

31) A special journal, like the Sales Journal, requires more posting than the general journal because the
general journal has special column totals.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-2

32) A special ledger for the controlling account in the general ledger would be called a subsidiary ledger.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-2

33) A controlling account is a listing of all the customers and the account balances.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-2

34) A multi-column sales journal is limited to just three types of sales.

Answer: FALSE
Diff: 2 Type: TF
Objective: 6-2

35) Recording to the accounts receivable ledger should be performed at the end of the month.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-2

36) A checkmark is placed in the PR column to show an amount has been posted to a subsidiary account.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-2

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For each of the following identify — in column 1 the category to which the account belongs, in column 2
the normal balance for the account, and in column 3 the financial statement on which the account balance
is reported.

Column 1 Column 2 Column 3

37) Sales ________ ________ ________
Answer: Sales: revenue credit income statement
Diff: 3 Type: ES
Objective: 6-2

38) Professional Fees Earned ________ ________ ________

Answer: Professional Fees Earned: revenue credit income statement
Diff: 3 Type: ES
Objective: 6-2

39) Sales Returns and Allowances ________ ________ ________

Answer: Sales Returns and Allowances: revenue debit income
statement
Diff: 3 Type: ES
Objective: 6-2

40) Cleaning Expense ________ ________ ________

Answer: Cleaning Expense: expense debit income
statement
Diff: 3 Type: ES
Objective: 6-2

41) Sales Discounts ________ ________ ________

Answer: Sales Discounts: revenue debit income
statement
Diff: 3 Type: ES
Objective: 6-2

42) Store Rent Expense ________ ________ ________

Answer: Store Rent Expense: expense debit income
statement
Diff: 3 Type: ES
Objective: 6-2

43) Owner's Capital ________ ________ ________

Answer: Owner's Capital: owner's equity credit balance sheet
Diff: 3 Type: ES
Objective: 6-2

44) Store Supplies ________ ________ ________

Answer: Store Supplies: asset debit balance sheet
Diff: 3 Type: ES
Objective: 6-2

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45) Define and compare the accounts receivable subsidiary ledger with the controlling account, Accounts
Receivable.
Answer: Accounts receivable subsidiary ledger is a group of accounts that contains, in alphabetical
order, the individual records of amounts owed by various credit customers. Daily postings are made to
the customer's account updating the current balances.

Accounts Receivable controlling account, located in the general ledger, shows a company the total
amount of money owed to it. Monthly postings are made to this account, although periodic postings are
also made—eg., when a credit memo is recorded in the General Journal.

Both the accounts receivable subsidiary ledger and the controlling account, Accounts Receivable, are
reconciled at the end of the month by preparing a schedule of accounts receivable.
Diff: 2 Type: ES
Objective: 6-2

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46) Fruit & Company sells Apples, Bananas and Oranges in large quantities on account, and uses a multi-
column sales journal. Record the following transactions for the month of April, 2017 in the journal
provided, then cross-add the totals at month end to prove your work is accurate.

Transactions:
April 2 Sold $300 of Apples and $500 of Oranges to ABC Company.
April 5 Sold $400 of Apples, $600 of Bananas plus $700 of Oranges to WMS Company.
April 10 Sold $200 of Apples plus $800 of Bananas to XYZ Company.
April 14 Sold $350 of Apples, $450 of Bananas plus $300 of Oranges to WMS Company.
April 21 Sold $150 of Apples and $750 of Oranges to ABC Company.
April 23 Sold $600 of Bananas plus $700 of Oranges to XYZ Company.
April 28 Sold $800 of Apples, $500 of Bananas plus $900 of Oranges to WMS Company.

Here is the multi-column sales Journal for April, 2017:

Date Customer Apple Sales Banana Sales Orange Sales Invoice total
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
________ ________ ________ ________ ________ ________
Answer:
Date Customer Apple Sales Banana Sales Orange Sales Invoice total
April 2 ABC Company 300 ________ 500 800
April 5 WMS Company 400 600 700 1,700
April 10 XYZ Company 200 800 ________ 1,000
April 14 WMS Company 350 450 300 1,100
April 21 ABC Company 150 ________ 750 900
April 23 XYZ Company ________ 600 700 1,300
April 28 WMS Company 800 500 900 2,200

Totals 2,200 2,950 3,850 9,000

Diff: 2 Type: ES
Objective: 6-2

47) Refer to the previous question. What is the amount credited to Apple Sales for the month?
Answer: $2,200
Diff: 2 Type: ES
Objective: 6-2

48) Refer to the Fruit & Company question. What is the amount credited to Banana Sales for the month?
Answer: $2,950
Diff: 2 Type: ES
Objective: 6-2

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49) Refer to the Fruit & Company question. What is the amount credited to Oranges Sales for the month?
Answer: $3,850
Diff: 2 Type: ES
Objective: 6-2

50) Refer to the Fruit & Company question above. What amount would be debited to the AR control
account for the month?
Answer: $9,000
Diff: 2 Type: ES
Objective: 6-2

51) Refer to the Fruit & Company question above. What amount would the ABC Company owe at month
end, assuming no payments were received?
Answer: $1,700
Diff: 2 Type: ES
Objective: 6-2

52) Refer to the Fruit & Company question above. What amount would the XYZ Company owe at month
end, assuming no payments were received?
Answer: $2,300
Diff: 2 Type: ES
Objective: 6-2

53) Refer to the Fruit & Company question above. What amount would the WMS Company owe at month
end, assuming no payments were received?
Answer: $5,000
Diff: 2 Type: ES
Objective: 6-2

6.3 Preparing, journalizing, and posting a credit memorandum.

1) If a credit memorandum is issued, what account will be increased on the seller's books?
A) Accounts Receivable
B) Accounts Payable
C) Sales Discount
D) Sales Returns and Allowances
Answer: D
Diff: 2 Type: MC
Objective: 6-3

2) A credit memorandum is sent to a customer for the purpose of

A) informing the customer an amount has been added to their account.
B) informing the customer an amount has been deducted from their account.
C) informing the customer they are terminated.
D) to inform the customer their account limit is being increased.
Answer: B
Diff: 2 Type: MC
Objective: 6-3

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3) If a credit memorandum is issued, what account will be decreased on the seller's books?
A) Accounts Receivable
B) Accounts Payable
C) Sales Discount
D) Sales Returns and Allowances
Answer: A
Diff: 2 Type: MC
Objective: 6-3

4) The return of merchandise by a credit customer was recorded with a debit to Accounts Payable and a
credit to Accounts Receivable and the subsidiary ledger. This error will cause
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.
Answer: A
Diff: 3 Type: MC
Objective: 6-3

5) Which account is used by management to keep track of possible customer dissatisfaction?

A) Sales Returns and Allowances
B) Sales Discount
C) Sales
D) Cost of Goods Sold
Answer: A
Diff: 1 Type: MC
Objective: 6-3

6) A customer returned merchandise for credit. This will be recorded with

A) a debit to an asset account.
B) a debit to a liability account.
C) a credit to an asset account.
D) None of these are correct.
Answer: C
Diff: 1 Type: MC
Objective: 6-3

7) A customer returned merchandise having already paid for it within the cash discount period. The
return will be recorded with
A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Capital.
D) None of these are correct.
Answer: A
Diff: 2 Type: MC
Objective: 6-3

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8) A characteristic of Sales Returns and Allowances is that
A) it has a debit balance.
B) it tracks returns from customers.
C) it is a contra-revenue account.
D) All of these answers are correct.
Answer: D
Diff: 1 Type: MC
Objective: 6-3

9) A record showing the activity and the balances owed by each customer is called the
A) general ledger.
B) sales journal.
C) cash receipts journal.
D) accounts receivable subsidiary ledger.
Answer: D
Diff: 2 Type: MC
Objective: 6-3

10) Every controlling account must have its own

A) revenue ledger.
B) general ledger.
C) subsidiary ledger.
D) journal.
Answer: C
Diff: 2 Type: MC
Objective: 6-3

11) Which of the following statements about subsidiary ledgers is most accurate?
A) The subsidiary ledger accounts will never equal the control account in the general ledger.
B) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for
Accounts Receivable.
C) The subsidiary ledger accounts will equal the amount in the Sales account.
D) All of these answers are correct.
Answer: B
Diff: 3 Type: MC
Objective: 6-3

12) Which of the following is a TRUE statement concerning Credit Memorandums?

A) Results in a decrease in Sales Returns and Allowances
B) Results in an increase in Sales Returns and Allowances
C) Increases sales
D) Has no effect on net sales
Answer: B
Diff: 2 Type: MC
Objective: 6-3

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13) The normal balance of the Sales Returns and Allowances account is
A) a credit.
B) a debit.
C) zero.
D) It doesn't have a normal balance.
Answer: B
Diff: 1 Type: MC
Objective: 6-3

14) The accounts receivable subsidiary ledger

A) is organized in alphabetical order.
B) is not kept in the same book as Accounts Receivable.
C) should equal the controlling account in the general ledger.
D) All of the above are correct.
Answer: D
Diff: 2 Type: MC
Objective: 6-3

15) Accounts in the accounts receivable subsidiary ledger are listed in order of how much is owed.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-3

16) The balance in the Accounts Receivable account is $2,100 debit. Therefore, the balances in the
subsidiary ledger should be $2,100.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-3

17) The accounts receivable subsidiary ledger shows the amount owed from each customer.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-3

18) The general ledger and the accounts receivable subsidiary ledger are the same book.
Answer: FALSE
Diff: 1 Type: TF
Objective: 6-3

19) To show that you have posted to an account in the General Ledger, you use a checkmark.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-3

20) Posting to the general ledger from the special journals should be done at the end of the month.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-3

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21) Explain why, when a customer returns merchandise after it was paid for, he/she may or may not
receive credit equal to the invoice value of the merchandise returned.
Answer: If the payment was made before the return and the payment was reduced by a cash discount
then only the net will be credited to the customer's account.
Diff: 3 Type: ES
Objective: 6-3

The Coral Co. had the following transactions involving the sale of merchandise. You are to prepare the
necessary general journal entries. All sales are subject to credit terms of 1/10, n/30.

22) July 16 Sold merchandise with an invoice price of $3,500 to Carter and Co.
________ ________ ________
________ ________ ________
Answer:
Accounts receivable - Carter 3,500
Sales 3,500
Diff: 3 Type: ES
Objective: 6-3

23) July 16 Sold merchandise with an invoice price of $6,000 to the Taylor Co.
________ ________ ________
________ ________ ________
Answer:
Accounts receivable - Taylor 6,000
Sales 6,000
Diff: 3 Type: ES
Objective: 6-3

24) July 20 Taylor Co. returned merchandise with an invoice price of $1,000.
________ ________ ________
________ ________ ________
Answer:
Sales returns and allowances 1,000
Accounts receivable - Taylor 1,000
Diff: 3 Type: ES
Objective: 6-3

25) July 25 Received full payment from Carter and Co.

________ ________ ________
________ ________ ________
Answer:
Cash 3,465
Sales discounts 35
Accounts receivable - Carter 3,500
Diff: 3 Type: ES
Objective: 6-3

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26) July 28 Received full payment from Taylor Co.
________ ________ ________
________ ________ ________
Answer:
Cash 5,000
Accounts receivable - Taylor 5,000
Diff: 3 Type: ES
Objective: 6-3

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27) The following are transactions for Brian for the month of October. Indicate how the following
transactions would be recorded by completing the necessary journal entries as appropriate (omit
explanations).

Oct. 1 Brian invested $15,000 in his business.

Oct. 3 Sold $2,500 of merchandise on account to H. Holand, sales invoice No. 1, terms 1/10, n/30.
Oct. 5 Sold $1,200 of merchandise on account to T. Traer, sales invoice No. 2, terms 1/10, n/30.
Oct. 13 Received cash from H. Holand in payment for October 3 transaction, less the discount.
Oct. 14 Issued credit memorandum No. 1 to T. Traer for $100 for merchandise returned from October 5
sale on account.
Oct. 15 Received cash from T. Traer for the amount due, less the discount.

GENERAL JOURNAL
Date Account Titles and Description PR Debit Credit

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GENERAL LEDGER

SUBSIDIARY LEDGER

Answer:
GENERAL JOURNAL

Date Account Tiles and Description PR Debit Credit

Oct 1 Cash 101 15,000
Capital 301 15,000

3 Accounts Receivable / H. Holand 102/X 2,500

Sales 401 2,500

5 Accounts Receivable/ T. Traer 102/X 1,200

Sales 401 1,200

13 Cash 101 2,475

Sales Discount 402 25
Accounts Receivable/ H. Holand 102/X 2,500

14 Sales Returns & Allowances 403 100

Accounts Receivable/ T. Traer 102/X 100

15 Cash 101 1,089

Sales Discount 402 11
Accounts Receivable/ T. Traer 102/X 1,100

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GENERAL LEDGER

SUBSIDIARY LEDGER

Diff: 3 Type: ES
Objective: 6-3

28) The following are selected transactions for P. Pratt Company. For each transaction, indicate the
account(s) to be debited and the account(s) to be credited. Also indicate in which of the following journals
each transaction will be recorded Sales Journal (S), Cash Receipts Journal (CR), or General Journal (GJ).

Account(s) Account(s)
Debit Credit Journal
________ ________ ________ a. Sold merchandise on account to M. Mahar.
________ ________ ________ b. P. Pratt invested additional cash in the business
________ ________ ________ c. Received payment from M. Mahar.
No discount was given.
________ ________ ________ d. Made a cash sale.
________ ________ ________ e. Issued a credit memo to B. Briggs.
Answer:
Account(s) Account(s)
Debit Credit Journal
a. Accts. Rec./M. Mahar Sales S
b. Cash P. Pratt, Capital CR
c. Cash Accts. Rec./M. Mahar CR
d. Cash Sales CR
e. Sales Returns and Allowances Accts. Rec./B. Briggs GJ
Diff: 2 Type: ES
Objective: 6-3

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6.4 Recording and posting cash receipts transactions, and a schedule of accounts
receivable

1) Collected a payment from a credit customer: This will be recorded with

A) a credit to an asset account.
B) a credit to a liability account.
C) a credit to Capital.
D) None of these are correct.
Answer: A
Diff: 2 Type: MC
Objective: 6-4

2) Received payment, within the discount period, for merchandise sold previously. This will be recorded
with
A) a credit to an asset account.
B) a debit to a liability account.
C) a debit to Capital.
D) None of these are correct.
Answer: A
Diff: 3 Type: MC
Objective: 6-4

3) A characteristic of a schedule of accounts receivable is that

A) it contains a list of customers' names with balances.
B) the total is equal to the accounts receivable control account at the end of the month.
C) it is prepared at the end of the month.
D) All of these answers are correct.
Answer: D
Diff: 3 Type: MC
Objective: 6-4

4) Payment for merchandise sold on credit for $50 subject to 2/10 n/30 was received within the discount
period — $49 was received. This was recorded with a debit to Sales Discounts for $1, a debit to Cash for
$49, and a credit to Accounts Receivable $50, but no mention was made of the subsidiary ledger account.
This error will cause
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.
Answer: C
Diff: 3 Type: MC
Objective: 6-4

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5) Monica's Closet received payment in full for goods sold within the discount period on a $480 sales
invoice, terms 2/10, n/30. Which entry records this transaction?
A) Debit Accounts Receivable; credit Sales for $480
B) Debit Cash; credit Accounts Receivable for $480
C) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Sales for $480
D) Debit Cash for $470.40, debit Sales Discount for $9.60; and credit Accounts Receivable for $480
Answer: D
Diff: 3 Type: MC
Objective: 6-4

6) Medeco sold goods for $75 to a charge customer. The customer returned for credit $25 worth of goods.
Terms of the sale were 1/10, n/30. If the customer pays the amount owed within the discount period, what
is the amount the customer should pay?
A) $49.50
B) $69.25
C) $75.00
D) $50.00
Answer: A
Diff: 3 Type: MC
Objective: 6-4

7) Zach returned $195 of merchandise to Secret Trails. His original purchase was $400, with terms 1/10,
n/30. If Justin pays the balance of his account after the discount period, how much should he pay?
A) $202.95
B) $205.00
C) $195.00
D) $400.00
Answer: B
Diff: 2 Type: MC
Objective: 6-4

8) A sales discount correctly taken by the charge customer was debited to Sales at the time the entry was
recorded. This error will cause
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the sales discount account to be understated.
D) the sales account to be overstated.
Answer: D
Diff: 2 Type: MC
Objective: 6-4

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9) The collection on account within the 2/10 n/30 discount period was recorded using a 10% discount
rather than a 2% discount in both the controlling and subsidiary accounts. This error will cause
A) the net income for the period to be understated.
B) the net income for the period to be overstated.
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.
Answer: A
Diff: 3 Type: MC
Objective: 6-4

10) When a customer pays an account, the transaction would be recorded in the
A) cash receipts journal.
B) purchases journal.
C) sales journal.
D) cash payments journal.
Answer: A
Diff: 1 Type: MC
Objective: 6-4

11) Logan's Art studio was moving and sold furniture that was no longer needed for cash. The entry
would include
A) a credit to Sales.
B) a debit to Sales.
C) a credit to Furniture.
D) a debit to Furniture.
Answer: C
Diff: 2 Type: MC
Objective: 6-4

12) Gina's Flower Shop received payment in full for goods sold within the discount period on a $1,000
sales invoice, terms 1/10, n/30. Which entry records this transaction?
A) Debit Accounts Receivable, credit Flower Sales for $1,000
B) Debit Cash, credit Accounts Receivable for $990
C) Debit Cash for $990, debit Sales Discount for $10, and credit Accounts Receivable for $1,000
D) Debit Cash for $990, debit Sales Discount for $10, and credit Flower Sales for $1,000
Answer: C
Diff: 2 Type: MC
Objective: 6-4

13) The balance in the Accounts Receivable account is $2,100 debit. Therefore, the balances in the
subsidiary ledger should be $2,100.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-4

14) Cash receipts are recorded in the Sales Journal.

Answer: FALSE
Diff: 1 Type: TF
Objective: 6-4

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15) When merchandise is sold on account, the transaction is recorded in the cash receipts journal.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-4

16) Posting to the general ledger from the special journals should be done at the end of each day.
Answer: FALSE
Diff: 2 Type: TF
Objective: 6-4

17) Receipts of cash should generally be recorded in the Cash Receipts Journal.
Answer: TRUE
Diff: 1 Type: TF
Objective: 6-4

18) Proving the clerical accuracy of the transactions in the cash receipts journal is done by crossfooting.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-4

19) The sundry accounts column in the cash receipts journal is a miscellaneous accounts column that
provides flexibility for recording infrequent transactions.
Answer: TRUE
Diff: 2 Type: TF
Objective: 6-4

20) Explain why, when a customer returns merchandise after it was paid for, he/she may or may not
receive credit equal to the invoice value of the merchandise returned.
Answer: If the payment was made before the return and the payment was reduced by a cash discount
then only the net will be credited to the customer's account.
Diff: 3 Type: ES
Objective: 6-4

21) Determine the amount to be paid within the discount period for a previous sale with an invoice price
of $10,500, subject to credit terms of 1/10, n/30.
Answer: $10,395.00
Diff: 2 Type: ES
Objective: 6-4

22) Determine the amount of cash collected on a credit sale with a price of $76,750 and credit terms of
1/10, n/30, assuming the payment was after the discount period had expired.
Answer: $76,750
Diff: 2 Type: ES
Objective: 6-4

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23) What is the self check that a person should implement after creating the schedule of accounts
receivable?
Answer: The total of the schedule of accounts receivable should be verified to be the same as the
controlling account in the general ledger. That account, the accounts receivable account in the general
ledger, equals the sum of the individual customer balances in the accounts receivable ledger.
Diff: 2 Type: ES
Objective: 6-4

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