5. TF.06-030 When a large quantity of merchandise is purchased, a reduction allo

Question

5. TF.06-030 When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade discount. True False 6. TF.06-031 A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called a cash discount. True False 7. TF.06-033 If the ownership of merchandise passes to the buyer when the seller delivers the merchandise to the carrier, the terms are stated as FOB destination. True False 8. TF.06-034 A sale of $750 on account subject to a sales tax of 6% would be recorded as an account receivable of $750. True False

Explanation / Answer

5. When a large quantity of merchandise is purchased, a reduction allowed on the sale price is called a trade discount. (T)

6. A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts. (F)

7. If the ownership of merchandise passes to the buyer when the seller delivers the merchandise for shipment, the terms are stated as FOB destination. (F)

8. A sale of $750 on account, subject to a sales tax of 6%, would be recorded as an account receivable of $750. (F)

Explanation: Accounts receivable will be debited 750 + 45 =795

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