Question

An item of merchandise was sold with an invoice price of $400 and credit terms of 2/10, n/30. The entry to record the sale would include a credit to Sales of

Select one:

a. $400

b. $396

c. $408

d. $392

The final closing entry to be journalized is typically the entry that closes the

Select one:

a. revenue accounts.

b. owner's withdrawals account.

c. owner's capital account.

d. expense accounts.

The buyer received an invoice from the seller for merchandise with a list price of $400 and credit terms of 2/10, n/60. The number 30 in the credit terms is the

Select one:

a. credit period

b. cash discount (discount rate) allowed for early payment of the invoice

c. discount period

d. trade discount

A Company purchased a delivery truck on January 1, 2015. The cost of the truck is SR 55,000. The company estimated that the truck will have a scrap value of SR 24,000 It has a useful life of 5 years. The book value in the second year will be:

Select one:

a. 31000

b. 18600

c. 24800

d. not enough information to decide.

On March 1, 2016, Dammam Real Estate Company acquired a land by paying $66,000 in cash. An old warehouse on the property was demolished at a cost of $6,825; the scrap materials were sold for $5,700. Additional expenditures before construction began included $5,575 attorney's fee for work concerning the land purchases, $5,950 real estate broker's fee.

Select one:

a. $66,000

b. $90,050

c. $41,950

d. $78,650

Answer 1

1)

The entry to record the sale would include a credit to Sales of $400

Option 'a' is correct.

2)

The final closing entry to be journalized is typically the entry that closes the Revenue Account.

Option 'a' is correct.

3)

The number 30 in the credit terms is the Credit period.

If the buyer does not pay the (full) invoice amount within the 10 days to qualify for the discount, then the net amount

is due within 30 days after the sales invoice date.

Option 'a' is correct.

4)

Not enough information to decide.

Its not mentioned in the question about whether Bookvalue should be calculated at the beginning or end or any intermediate date of the Second year.

Also, Question doesn't specify which method to use to calculate depreciation.

Option 'd' is correct.

5)

Cost of the Land = Purchase price + Cost of Demolishion - sale value of scrap + Attorney's fee + Broker's fee

= 66000 + 6825 - 5700 + 5575 + 5950

= $78,650.

Option 'd' is correct.