1. Consider the following facts: - Company A sells goods on credit to Company B
ID: 2448167 • Letter: 1
Question
1.
Consider the following facts:
- Company A sells goods on credit to Company B on July 9.
- The total sale was for $3,000.
- The terms of the sale were 1/10, n/60
- Company A receives payment on July 18.
Which of the following is true regarding the journal entry Company A makes on July 18?
a. Accounts Receivable will be credited for $2,970
b. None of these answers are correct
c. Cash will be debited for $3,000
d. Sales Discounts will be debited for $30
e.Sales Discounts will be debited for $60
2.
Consider the following facts:
- Company A had merchandise inventory of $550,000 at January 1
- For the year, it had purchases of $2,250,000
- For the year, it had net sales of $3,200,000
- The physical inventory on December 31 showed $500,000 in the warehouse
- Company A's gross profit on sales was 30%
- Company A's suspects some of its ending inventory is missing due to theft
The estimated cost of the missing inventory is:
a.$150,000
b. $60,000
c. $1,340,000
d. $100,000
e. None of these answers are correct
Explanation / Answer
Answer for question no.1:
Journal entry to be made on receipt of the cash from debtors is as follows:
Therefore, the answer is Option d, sales discount will be debited for $30.
Answer for question no.2:
Opening stock+purchases - closing stock = Cost of goods sold
Opening stock =$550,000
Given purchases =$2,250,000
Sales =$3,200,000
Gross profit =30% on sales therefore, cost of goods sold=70% of sales
=$3,200,000 *70%
=$2,240,000.
Substituting the values in the above formula
$550,000+$2,250,000 - $2,240,000. =Closing stock
Closing stock =$560,000-------(A)
Physical inventory is showing $500,000.-----------------(B)
Therefore, inventory missing = (A) - (B)=$60,000
Answer is Option b.
Date Entry Debit Credit Journal entry when payment is received with in discount period 18-Jul Cash a/c Dr $2,970.00 Sales discounts a/c Dr $30.00 To Accounts receivable a/c Cr $3,000.00 (Being payment received and discount allowed)Related Questions
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