True/False
Indicate whether the sentence or statement is true
or false.
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1.
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The
Purchases account is reported as an asset on the balance sheet.
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2.
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Cash
purchases of merchandise are not recorded in the purchases journal.
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3.
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The
entry to record the return of merchandise purchased on credit includes a debit to Accounts Payable
and a credit to Purchases Returns and Allowances.
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4.
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Freight In and Purchases Returns and Allowances are deducted from Purchases to
determine the net delivered cost of purchases.
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5.
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The
amount of a check issued to a creditor is posted from the cash payments journal to the debit column
of the creditor's account in the accounts payable subsidiary ledger.
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6.
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When
an accounts payable subsidiary ledger is used, a debit or credit to Accounts Payable in a general
journal entry requires two postings.
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7.
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The
Purchases account has a normal debit balance.
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8.
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At
the end of the accounting period, the Purchases and Freight In accounts are closed to the Income
Summary account.
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9.
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No
amounts are posted from the purchases journal to the subsidiary ledger during the
month.
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10.
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The
Purchases Returns and Allowances account has a normal debit balance.
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11.
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Another name that may be used for the Freight In account is Transportation
In.
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12.
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The
credit terms 2/10, n/30 allow the customer to take a 2 percent discount if payment is made within 10
days.
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13.
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The
abbreviation P1 in the Posting Reference column of an account indicates that the data were posted
from page 1 of the cash payments journal.
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14.
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The
individual amounts in the Accounts Payable Debit column of the cash payments journal are posted to
the accounts payable subsidiary ledger.
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15.
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To
record a cash purchase of merchandise, the accountant would debit Purchases and credit
Cash.
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16.
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Purchases Discount is a contra cost account.
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17.
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Grouping all transactions involving cash payments together in the cash payments
journal strengthens the audit trail.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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18.
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The
entry to record a purchase of merchandise on credit includes a. | a debit to
Purchases and a credit to Accounts Receivable. | b. | a credit to
Purchases and a credit to Accounts Payable. | c. | a debit to
Accounts Payable and a credit to Purchases. | d. | a debit to
Purchases and a credit to Accounts Payable. | | |
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19.
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Freight charges on merchandise purchases should be debited to a. | the Purchases
account. | b. | the Accounts Payable account. | c. | the Freight In
account. | d. | the creditor's account in the subsidiary
ledger. | | |
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20.
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To
record a return of merchandise purchased on credit, the accountant would a. | debit Purchases
Returns and Allowances and credit Accounts Receivable. | b. | debit Purchases
Returns and Allowances and credit Purchases. | c. | debit Accounts
Payable and credit Purchases Returns and Allowances. | d. | debit Purchases
and credit Purchases Returns and Allowances. | | |
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21.
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Check
marks next to the individual amounts in the purchases journal mean that the amounts a. | have been posted
to the general ledger. | b. | have been posted to the accounts payable subsidiary
ledger. | c. | have been posted to the accounts receivable subsidiary
ledger. | d. | do not need to be posted to any
account. | | |
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22.
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The
total of the balances in the creditor's accounts should agree with the balance of a. | the Purchases
account in the general ledger. | b. | the Accounts Receivable account in the general
ledger. | c. | the Accounts Payable account in the general
ledger. | d. | the Sales account in the general
ledger. | | |
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23.
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The
Purchases account is a. | a permanent account. | c. | a subsidiary account. | b. | a temporary
account. | d. | a liability
account. | | | | |
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24.
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Purchases of merchandise on credit should be recorded in a. | the purchases
journal. | c. | the cash
payments journal. | b. | the general journal. | d. | the sales journal. | | | | |
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25.
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A
firm had purchases of $14,800, freight charges of $200, and purchases returns and allowances of
$1,000 during one month. Its net delivered cost of purchases was a. | $13,600. | c. | $16,000. | b. | $15,600. | d. | $14,000 | | | | |
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26.
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To
record the payment of a purchase invoice when a cash discount is taken, the accountant
would a. | debit Accounts
Payable, credit Purchases Discount, and credit Cash. | b. | debit Accounts
Payable, debit Purchases Discount, and credit Cash. | c. | debit Accounts
Payable and credit Cash. | d. | debit Purchases, credit Purchases Discount, and credit
Cash. | | |
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Matching
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Assuming that the Purchases Journal is used only to record purchases of merchandise
on account, match the following transactions with the proper journal: a. | Sales
Journal | d. | Cash Payments
Journal | b. | Purchases Journal | e. | General Journal | c. | Cash Receipts
Journal | | | | |
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27.
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Paid
a creditor on account.
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28.
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Bought merchandise on account.
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29.
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Sold
merchandise for cash.
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30.
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Adjusted for insurance expired.
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31.
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Received payment on account from a charge customer.
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32.
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Received a credit memo for merchandise returned.
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33.
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Bought equipment on credit.
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34.
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Sold
merchandise on account.
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35.
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Bought merchandise for cash.
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36.
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The
owner invested personal noncash assets in the business.
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37.
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The
owner withdrew cash for personal reasons
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