Multiple Questions Answers

1. Merchandise inventory:
A) is a long-term asset.
B)is a current asset.
C) includes supplies.
D) is classified with investments on the balance sheet.
E) Must be sold within one month.

2. The credit terms 2/10, n/30 are interpreted as:
A) 2% cash discount if the amount is paid within 10 days, with the balance due in 30 days.
B) 10% cash discount if the amount is paid within 2 days, with the balance due in 30 days.
C) 30% discount if paid within 2 days.
D) 30% discount if paid within 10 days.
E) 2% discount if paid within 30 days.

3. On October 1, Robinson Company sold merchandise in the amount of $5,800 to Rosser, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the perpetual inventory system. The journal entry or entries that Robinson will make on October 1 is:
A)Sales..............................5,800
       Sales receivable .............       5,800
B)Sales..............................5,800
       Accounts Receivable...........       5,800
Cost of goods sold.................4,000
       Merchandise inventory.........       4,000
C)Accounts Receivable................5,800
       Sales.........................       5,800
D)Accounts Receivable................5,800
       Sales.........................       5,800
Cost of Good Sold..................4,000
       Merchandise Inventory.........       4,000
E)Accounts Receivable................4,000
       Sales.........................       4,000

4. On October 1, Whaley Company sold merchandise in the amount of $5,800 to Lee Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Whaley uses the perpetual inventory system. Lee pays the invoice on October 8, and takes the appropriate discount. The journal entry that Whaley makes on October 8 is:
A)Cash...............................5,800
      Accounts Receivable............       5,800
B)Cash...............................4,000
      Accounts Receivable............       4,000
C)Cash...............................3,920