CHAPTER 7

TRUE OR FALSE

1 T 11 T 21 F 31 F 41 T 51 F 61 T 71 T
2 F 12 T 22 F 32 F 42 T 52 F 62 T 72 F
3 T 13 T 23 F 33 F 43 T 53 T 63 F 73 F
4 F 14 F 24 F 34 T 44 T 54 T 64 T 74 F
5 F 15 F 25 F 35 F 45 T 55 F 65 T 75 F
6 F 16 F 26 T 36 F 46 T 56 T 66 T 76 T
7 T 17 T 27 T 37 F 47 F 57 T 67 T 77 F
8 F 18 F 28 T 38 T 48 F 58 T 68 T 78 T
9 F 19 T 29 T 39 F 49 T 59 F 69 F 79 T
10 F 20 F 30 T 40 F 50 T 60 F 70 T 80 T

MULTIPLE CHOICE

1 B 11 A 21 D 31 C 41 D 51 A 61 C 71 C 81 D 91 D
2 C 12 D 22 D 32 A 42 A 52 C 62 B 72 B 82 D 92 C
3 D 13 D 23 B 33 A 43 D 53 D 63 D 73 D 83 B 93 A
4 B 14 D 24 B 34 C 44 B 54 D 64 D 74 A 84 B 94 B
5 D 15 D 25 D 35 C 45 C 55 D 65 B 75 A 85 B D
6 A 16 D 26 D 36 C 46 B 56 C 66 A 76 A 86 A A
7 D 17 D 27 D 37 B 47 C 57 D 67 C 77 C 87 C A
8 C 18 C 28 D 38 B 48 D 58 D 68 C 78 C 88 D C
9 D 19 D 29 A 39 B 49 D 59 D 69 C 79 B 89 A D
10 C 20 D 30 A 40 D 50 C 60 D 70 C 80 A 90 B B

95 B 101 A
96 AC 102 C
97 B 103 B
98 C 104 B
99 C 105 B
A 106 C
B 107 B
C 108 D
100 A 109
101 A 110
STRAIGHT PROBLEMS
Problem 1:
Answer
List Price` 1,200,000
Less: Trade discount 20% 240,000
Balance 960,000
Less: Trade discount 5% 48,000
Invoice price 912,000
Less: Purchase returns 10,000
Total 902,000
Less Cash Discount 2% 18,040
Balance 883,960
Add: Freight 1,000
Amount Paid 884,960

Problem 2:

1. Periodic Inventory
a. Accounts Receivable 120,000
Freight-out 1,000
Sales 120,000
Cash 1,000

b. Sales return and allowances 10,000 10,000

Accounts Receivable

c. Cash 107,800
Sales Discount 2,200
Accounts Receivable 110,000
(120,000 - 10,000) x 98%

d. Purchases 120,000
Accounts Payable 120,000

e. Accounts Payable 10,000

Purchase return and allowances 10,000

f. Accounts Payable 110,000

Purchase discount 107,800
Cash 2,200

2. Perpetual Inventory
a. Accounts Receivable 120,000
Freight-out 1,000
Sales 120,000
Cash 1,000

COGS 80,000 80,000

 Merchandise Inventory

b. Sales return and allowances 10,000 10,000

Accounts Receivable

Merchandise Inventory 6,000

COGS 6,000

c. Cash 107,800
Sales Discount 2,200
Accounts Receivable 110,000
(120,000 - 10,000) x 98%

d. Merchandise Inventory 120,000

Accounts Payable 120,000

e. Accounts Payable 10,000

Merchandise Inventory 10,000

f. Accounts Payable 110,000

Merchandise Inventory 107,800
Cash 2,200

Problem 3:

1 Accounts receivable 52,000

Sales 50,000
Cash 2,000

COGS 30,000
Merchandise inventory 30,000

2 Accounts receivable 100,000

Sales 100,000

COGS 60,000
Merchandise inventory 60,000

3 Freight-out 4,000
cash 4,000

4 Sales return and allowances 20,000

Accounts receivable 20,000

Merchandise inventory 12,000

COGS 12,000
 5 Cash 51,000
Sales Discounts 1,000
Accounts receivable 52,000

6 Cash 79,200
Sales discounts 800
Accounts receivable 80,000

7 Accounts receivable 52,000

Sales 50,000
Cash 2,000

COGS 30,000
Merchandise inventory 30,000

8 Accounts receivable 100,000

Sales 100,000

COGS 60,000
Merchandise inventory 60,000

9 Freight-out 4,000
Cash 4,000

10 Sales return and allowances 20,000

Accounts receivable 20,000

Merchandise inventory 12,000

COGS 12,000

11 Cash 51,000
Sales discount 1,000
Accounts receivable 52,000

12 Cash 79,200
Sales discount 800
Accounts receivable 80,000

Periodic
1 Accounts receivable 52,000
Sales 50,000
Cash 2,000

2 Accounts receivable 100,000

Sales 100,000

3 Freight-out 4,000
Cash 4,000

4 Sales return and allowances 20,000

 Accounts receivable 20,000

5 Cash 51,000
Sales Discounts 1,000
Accounts receivable 52,000

6 Cash 79,200
Sales discounts 800
Accounts receivable 80,000

7 Accounts receivable 52,000

Sales 50,000
Cash 2,000

8 Accounts receivable 100,000

Sales 100,000

9 Freight-out 4,000
Cash 4,000

10 Sales return and allowances 20,000

Accounts receivable 20,000

11 Cash 51,000
Sales discount 1,000
Accounts receivable 52,000

12 Cash 79,200
Sales discount 800
Accounts receivable 80,000

Problem 4:

1.
List Price 150,000
Trade discount (15,000)
Invoice Price 135,000
Sales discount (135,000 x 2%) (2,700)
Total Cash Collected 132,300

2.
List Price 150,000
Trade discount -
Invoice Price 150,000
Sales discount (150,000 x 1%) (1,500)
Total Cash Collected 148,500
3.
List Price 150,000
Trade discount (150,000 x 10%) (15,000)
Total 135,000
Trade discount (135,000 x 5%) (6,750)
Invoice Price 128,250
Sales discount -
Total Cash Collected 128,250

4.
List Price 150,000
Trade discount (150,000 x 20%) (30,000)
Invoice Price 120,000
Sales discount -
Total Cash Collected 120,000

5.
List Price 150,000
Trade discount (150,000 x 20%) (30,000)
Total 120,000
Trade discount (120,000 x 10%) (12,000)
Invoice Price 108,000
Sales discount (3,240)
Total Cash Collected 104,760

Problem 5:

1.
List Price 80,000
Trade discount (8,000)
Invoice Price 72,000
Purchase returns (4,000)
Total 68,000
Purchase discount (680)
Total cash payment 71,320

2.
List Price 100,000
Trade discount (20,000)
Total 80,000
Trade discount (4,000)
Invoice Price 76,000
Purchase returns (1,000)
Total 79,000
 Purchase discount (1,580)
Total 78,420
Less: Freight collect (500)
Total cash payment 77,920

3.
List Price 250,000
Trade discount (75,000)
Invoice Price 175,000
Purchase returns (5,000)
Total 170,000
Purchase discount -
Total 175,000
Add: Freight prepaid 5,000
Total cash payment 180,000

4.
List Price 220,000
Trade discount (22,000)
Invoice Price 198,000
Purchase returns (10,000)
Total 188,000
Purchase discount (3,760)
Total cash payment 194,240

Problem 6:

Periodic
a. Accounts Receivable 10,000
Sales 10,000

b. Purchases 1,440
Cash 1,440

c. Purchases 5,200
Accounts Payable 5,200

d. Sales return allowances 600

Accounts Receivable 600

e. Cash 9,700
Sales Discount 300
Accounts Receivable 10,000
(10,000 x 97% = 9,700)

f. Accounts Payable 1,200

Purchase return and allowances 1,200

g. Freight-in 400
 Cash 400

h. Accounts payable 4,000

Purchase Discount 40
Cash 3,960
(5,200 - 1,200) x 99% = 3,960)

i. Accounts Receivable 14,000

Sales 14,000

j. Cash 13,720
Sales Discount 280
Accounts Receivable 14,000
(14,000 x 98% = 13,720)

Perpetual
a. Accounts Receivable 10,000
Sales 10,000

COGS 7,000
Merchandise Inventory 7,000

b. Merchandise Inventory 1,440

Cash 1,440

c. Merchandise Inventory 5,200

Accounts Payable 5,200

d. Sales return allowances 600

Accounts Receivable 600

Merchandise Inventory 420

COGS 420

e. Cash 9,700
Sales Discount 300
Accounts Receivable 10,000
(10,000 x 97% = 9,700)

f. Accounts Payable 1,200

Merchandise Inventory 1,200

g. Merchandise Inventory 400

Cash 400

h. Accounts payable 4,000

Merchandise Inventory 40
Cash 3,960
(5,200 - 1,200) x 99% = 3,960)
 i. Accounts Receivable 14,000
Sales 14,000

COGS 9,800
Merchandise Inventory 9,800

j. Cash 13,720
Sales Discount 280
Accounts Receivable 14,000
(14,000 x 98% = 13,720)

Problem 7:

1 Merchandise inventory 156,500

Accounts payable 156,500

2 Merchandise inventory 80,000

Accounts payable 80,000

3 Accounts receivable 98,000

Sales 98,000

4 Accounts payable 20,000

Merchandise inventory 20,000

5 Accounts payable 156,500

Cash 153,500
Merchandise inventory 3,000

6 Sales return and allowances 18,000

Accounts receivable 18,000

Merchandise inventory 10,800

COGS 10,800

7 Accounts payable 60,000

Cash 59,400
Merchandise inventory 600

8 Cash 78,400
Sales discount 1,600
Accounts receivable 80,000

9 COGS 36,500
Merchandise inventory 36,500
(850,000 -813,500 = 36,500
Problem 8:
A. Using the Gross Method
Purchases 200,000
Accounts Payable 200,000
To record the purchase of materials

Assume paid within the disc ount period

Accounts Payable 200,000
Purchase Discount 2,000
Cash 198,000

Assume not paid within the period

Accounts payable 200,000
Cash 200,000

B. Using the Net Method

Purchases 198,000
Accounts Payable 198,000
To record the purchase of materials

Assume paid within the disc ount period

Accounts Payable 198,000
Cash 198,000

Assume not paid within the period

Accounts payable 198,000
Lost on purchase discount (expense) 2,000
Cash 200,000

Problem 9:
Case 1: 4,500
Case 2: 4,500
Case 3: 4,000
Case 4: 4,000
Case 5: 4,420
Case 6: 3,920
Case 7: 3,920
Case 8: 4,420
Problem 10:
Aug
2 Accounts Receivable 50,000
Sales 50,000

5 Accounts Receivable 22,000

Freight-out 1,000
Sales 22,000
Cash 1,000
 6 No entry

8 Purchases 10,000
Freight-in 1,000
Accounts payable 10,000
Cash 1,000

12 Purchases 12,000
Accounts payable 11,000
Cash 1,000

12 Cash 49,500
Sales Discount (50K x 1%) 500
Accounts Receivable 50,000

15 Cash 22,000
Accounts Receivable 22,000

18 Accounts payable 10,000

Purchase discount (10K x 2%) 200
Cash 9,800

19 Cash 22,000
Sale 22,000

20 Purchases 30,000
Freight-in 2,000
Accounts payable 32,000

24 Accounts payable 11,000

Purchase discount (12K x 1%) 120
Cash 11,120

25 Salaries expense 15,000

Cash 15,000

26 Utilities expense 4,000

Cash 4,000

30 Accounts payable 32,000

Cash 32,000

Problem 11:
1. 48,000
2. 140,000
3. 188,000
4. 64,000
5. 170,000
6. 6,000
7. 170,000
8. 200,000
9. 12,000
10. 252,000
11. 333,000
12. 20,000
13. 342,000
14. 260,000
15. 342,000
Problem 12:

Monette Shiela Christine Hazel

Net Sales 39,000 150,000 50,000 100,000
Cost of Goods Sold 29,000 90,000 45,000 95,000
Gross Profit 10,000 60,000 5,000 5,000

Gross Purchases 20,000 80,500 45,000 35,000

Freight in 1,000 2,500 2,700 4,200
Purchase discount 500 - 1,200 200
Purchase return 1,500 3,000 3,000 1,000
Net Purchases 19,000 80,000 43,500 38,000
Inventory 1/1 20,000 20,000 10,000 62,000
Total goods available for sale 39,000 100,000 53,500 100,000
Inventory 12/31 10,000 10,000 8,500 5,000
Cost of Goods Sold 29,000 90,000 45,000 95,000

Problem 13:
Answer
Sales 507,000
Sales Return (20,800)
Sales Discount (29,250)
Net Sales 456,950
COGS (325,000)
Gross Profit 131,950
Operating Expenses
Depreciation Expense 3,900
Freight-out 19,500
Gas and Oil Expense 5,850
Representation
Expense 58,500
Salaries Expense 71,500
Utilities expense 7,800 167,050
Net Income (35,100)

Beg. Inventory 227,500

Net Purchases
Gross Purchases 308,750
Freight in 13,000
 Purchase discount (17,875)
Purchase return (82,875) 221,000
TGAS 448,500
EI 123,500
COGS 325,000

Ending capital = 104,000 beg. – 13,000 drawing – net loss 35,100 = 55,900