Question

1a) Rodriguez Company purchased merchandise from Emmett Company with freight terms of

FOB shipping point. The freight costs will be paid by the

a. shipping company.

b.   buyer (Rodriguez Company)

c. seller (Emmett Company)

d.   buyer and the seller.

b) Gee Company purchased merchandise inventory with an invoice price of $7,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Gee Company pays within the

discount period?

a.	$6,300
b.	$6,440
c.	$6,860
d.	$7,000

C) A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of $100 is

granted on July 18. What amount is received as payment in full on July 24?

a.	$3,600
b.	$3,528
c.	$3,500
d	$3,430

D) The Sales Returns and Allowances account is classified as a(n)

a. asset account.

b.   contra asset account.

c. expense account.

d.   contra revenue account.

Answer 1

1a) b.Buyer Rodriguez Company- Purchase of inventory for resale is normally recorded by the merchandiser when the goods are received from the seller.

b) c. Gee Company purchased merchandise inventory with an invoice price of $7,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Gee Company pays within the discount period?

c)$7000-2% of $7000 =$7000-$140 =$6860 substract 2 % from the total if paid in 10 days.

C) A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?

Since the credit sales                      =$3600

Return made on July 18    =$100

Net Payment before discount           =$3500

Discount 2% if payment made

within 10 days                                 =$70

Net Payment as payment is made

on July 24                                      =$3430

Hence correct option is D $3430

D d Contra Revenue Account