Question 1

Which document initiates the purchasing cycle in a business?

Accepted Answer

Purchase Requisition

Question 2

A company receives goods shipped FOB shipping point. Who pays the shipping charges and when does legal title pass?

Accepted Answer

Buyer pays shipping; title passes when goods are shipped

Question 3

Which journal is used to record all purchases made on account?

Accepted Answer

Purchases Journal

Question 4

At the end of the month, the total of all vendors’ ending balances in the accounts payable subsidiary ledger should:

Accepted Answer

Equal the ending balance in Accounts Payable, the controlling account

Question 5

A debit memorandum is issued by the purchaser to the vendor to indicate:

Accepted Answer

A return or allowance has occurred

Question 6

If Art’s Clothing Company returns merchandise worth $200 to Thorpe Co., what is the correct journal entry?

Accepted Answer

Debit Accounts Payable $$200; Credit Inventory 200$$

Question 7

Which of the following is TRUE regarding freight charges paid by the vendor to ship inventory to a buyer?

Accepted Answer

They are added to inventory as a debit

Question 8

What is the purpose of the schedule of accounts payable?

Accepted Answer

To list vendors with an ending balance as of a particular date

Question 9

Mary Rose Co. purchases merchandise with a list price of $4,000 and a 30% trade discount. What is the purchase price?

Accepted Answer

$2,800

Question 10

If a company receives a 3% cash discount on a purchase price of $2,800, what is the amount of the discount?

Accepted Answer

$84

Question 11

Using a perpetual inventory system, what is the effect on inventory when a purchase discount is received?

Accepted Answer

Inventory is credited

Question 12

Which of the following transactions would NOT be recorded in the purchases journal?

Accepted Answer

Purchase of merchandise for cash

Question 13

A company pays a vendor within the discount period for a purchase of $2,800 with a 3% cash discount. What is the actual cost of the merchandise?

Accepted Answer

$2,716

Question 14

Which account is credited when merchandise is returned to a supplier under the perpetual inventory system?

Accepted Answer

Inventory

Question 15

Which of the following best describes the accounts payable subsidiary ledger?

Accepted Answer

A book or file that contains the names of creditors and amounts owed from purchases on account

Question 16

Which of the following is a multi-step process that involves both the purchases journal and the accounts payable subsidiary ledger?

Accepted Answer

Entering a purchase on account and updating the vendor’s balance

Question 17

If a company purchases inventory and the vendor pays the freight charges, how should the company record the freight cost?

Accepted Answer

Debit Inventory

Question 18

Which of the following is TRUE about the posting of totals from the purchases journal?

Accepted Answer

Totals are posted to the general ledger accounts at the end of the month

Question 19

Which of the following activities affects both the Inventory and Cost of Goods Sold accounts?

Accepted Answer

Cost of sales transactions

Question 20

A company receives a purchase invoice for $5,000 with terms 2/10, n/30. If the company pays within 10 days, what is the amount paid?

Accepted Answer

$4,900

Special Journals and Subsidiary Ledgers: Purchases and Cash Payments Journals (Chapter 7 Study Notes)

Study Guide - Practice Questions