Question

Use the following information to answer the next 11 questions. SELECT ALL ANSWERS THAT APPLY.

On May I. Sam Company sold $5,000 of inventory to Bob Company. The sale was made on account and Sam granted Bob credit terms of 2/10. n/30. The inventory cost Sam Company $3,000. On May 3, Bob returned $1,000 of the inventory to Sam. (The inventory returned by Bob cost Sam $600.) On May 9, Bob paid Sam in full for the amount due.

1. What account will Bob debit on May I if the periodic inventory system is used?

A) Accounts Payable

B) Cost of Goods Sold

c) Merchandise Inventory

D) Purchases

E) None of the above

2. What account will Bob debit on May I if the perpetual inventory system is used?

A) Accounts Payable

B) Cost of Goods Sold

C) Merchandise Inventory

D) Purchases

E) None of the above

3. What account will Sam debit on May l if the periodic inventory system, is used?

A) Accounts Payable

B) Cost of Goods Sold

C) Merchandise Inventory

D) Purchases

E) None of the above

4. What account will Sam debit on May I if the perpetual inventory system is used?

A) Accounts Payable

B) Cost of Goods Sold

C) Merchandise Inventory

D) Purchases

E) None of the above

5. What journal entry will Bob record on May 3 if the periodic inventory system is used?

A) debit Accounts Payable, $1,000; credit Merchandise Inventory, $1,000.

B) debit Accounts Payable, $1,000; credit Purchases, $1,000.

C) debit Accounts Payable, $1,000; credit Purchase Discounts, $1,000.

D) debit Accounts Payable, $1,000; credit Purchase Returns and Allowances, $1,000.

E) debit Merchandise Inventory; $600; credit Cost of Goods Sold, $600.

6. what journal entry will Bob record on May 3 if the perpetual inventory system is used?

A) debit Accounts Payable, $1,000; credit Merchandise Inventory, $1,000.

B) debit Accounts Payable, $1,000; credit Purchases, $1,000.

C) debit Accounts Payable, $1,000; credit Purchase Discounts, $1,000.

D) debit Accounts Payable, $1,000; credit Purchase returns and Allowances, $1,000.

E) debit Merchandise Inventory; $600; credit Cost of Goods Sold, $600.

7. what journal entry will Sam record on May 3 if the periodic inventory system is used?

A) debit Merchandise Inventory, $600; credit Cost of Goods Sold, $600.

B) debit Sales, $1,000; credit Accounts Receivable, $1,000.

C) debit Sales, $1,000; credit Cash, $1,000.

D) debit Sales Returns and Allowances, $1,000; credit Accounts Receivable, $1,000.

E) debit Sales Returns and Allowances, $1,000; credit Cash, $1,000.

Answer 1

1) If periodic inventory system is used, then the bob company will debit Purchases Account for purchase of inventory because periodic inventory system is a system of inventory in which updates are made on a periodic basis. Hence the correct option is D) Purchases.

2) If perpetual inventory system is used, then the bob company will debit Merchandise Inventory Account for purchase of inventory because perpetual inventory system is a method of accounting for inventory that records the sale of purchase of inventory immediately to inventory account. Hence the correct option is C) Merchandise Inventory

3) Under periodic inventory system, only one entry will be recorded on the sale of inventory in the books of sam company which is shown as follows:-

Accounts Receivable Dr. 5,000

Sales Revenue 5,000

Therefore Accounts Receivable will be debited. Hence the correct answer from the given options is E) None of the above.

4) Under perpetual inventory system, two entries will be recorded on the sale of inventory in the books of sam company which is shown as follows:-

Accounts Receivable Dr. 5,000

Sales Revenue 5,000

(To record sales)

Cost of goods sold Dr. 3,000

Merchandise Inventory 3,000

(To record the cost of goods sold)

Hence the correct answer from the given options is B) Cost of Goods Sold.

5) Under periodic inventory system, the following entry is passed to record purchase return.

Debit Accounts Payable, $1,000; Credit Purchase Returns and Allowances, $1,000.

Hence the correct option is D) debit Accounts Payable, $1,000; credit Purchase Returns and Allowances, $1,000.

6) Under perpetual inventory system, the following entry is passed to record purchase return.

Debit Accounts Payable, $1,000; Credit Merchandise Inventory, $1,000.

Hence the correct option is A) debit Accounts Payable, $1,000; credit Merchandise Inventory, $1,000.

7) Under periodic inventory system, the following entry will record the return of sales made on account.

Debit Sales Returns and Allowances, $1,000; Credit Accounts Receivable, $1,000.

Hence the correct option is D) debit Sales Returns and Allowances, $1,000; credit Accounts Receivable, $1,000.