6.2   Preparing, journalizing, and posting a credit memorandum.

1) If a credit memorandum is issued, what account will be increased on the seller's books?

A) Accounts Receivable

B) Accounts Payable
C) Sales Discount
D) Sales Returns and Allowances

2) If a credit memorandum is issued, what account will be decreased on the seller's books?

A) Accounts Receivable
B) Accounts Payable
C) Sales Discount

D) Sales Returns and Allowances

3) The return of merchandise by a credit customer was recorded with a debit to Accounts Payable and a credit to Account
A) the net income for the period to be overstated.
B) the net income for the period to be understated.

C) the control account to not agree with the subsidiary ledger.

D) the assets to be overstated.

4) Collected a payment from a credit customer: This will be recorded with
A) a credit to an asset account.

B) a credit to a liability account.

C) a credit to Capital.
D) None of these are correct.
5) Received payment, within the discount period, for merchandise sold previously. This will b

A) a credit to an asset account.

B) a debit to a liability account.

C) a debit to Capital.
D) None of these are correct.
6) A record showing the activity and the balances owed by each customer is called the
A) general ledger.
B) sales journal.
C) cash receipts journal.

D) accounts receivable subsidiary ledger.

7) Every controlling account must have its own

A) revenue ledger.

B) general ledger.
C) subsidiary ledger.

D) journal.
8) A characteristic of a schedule of accounts receivable is that
A) it contains a list of customers' names with balances.

B) the total is equal to the accounts receivable control account at the end of the month.

C) it is prepared at the end of the month.

D) All of these answers are correct.
9) Which of the following statements about subsidiary ledgers is most accurate?

A) The subsidiary ledger accounts will never equal the control account in the general ledger.

B) The accounts receivable subsidiary ledger is a book of accounts that provides supporting detail for Accounts Receivable
C) The subsidiary ledger accounts will equal the amount in the Sales account.
D) All of these answers are correct.

10) Payment for merchandise sold on credit for $50 subject to 2/10 n/30 was received within th

A) the net income for the period to be overstated.

B) the net income for the period to be understated.
C) the control account to not agree with the subsidiary ledger.
D) the assets to be overstated.
11) The collection on account within the 2/10 n/30 discount period was recorded using a 10% discount rather than a 2% d
A) the net income for the period to be understated.

B) the net income for the period to be overstated.

C) the control account to not agree with the subsidiary ledger.

D) the assets to be overstated.

12) The accounts receivable subsidiary ledger
A) is organized in alphabetical order.
B) is not kept in the same book as Accounts Receivable.
C) should equal the controlling account in the general ledger.
D) All of the above are correct.
13) When a customer pays an account, the transaction would be recorded in the
A) cash receipts journal.
B) purchases journal.
C) sales journal.
D) cash payments journal.
14) Gina's Flower Shop received payment in full for goods sold within the discount period on a $1,000 sales invoice, terms
A) Debit Accounts Receivable, credit Flower Sales for $1,000
B) Debit Cash, credit Accounts Receivable for $990
C) Debit Cash for $990, debit Sales Discount for $10, and credit Accounts Receivable for $1,000
D) Debit Cash for $990, debit Sales Discount for $10, and credit Flower Sales for $1,000
 Answer 6.2-1
D) Sales Returns and Allowances

When a credit memorandum is issued, sales returns and allowances is debited and
accounts receivable is credited, resulting in increase in sales returns and allowances
and decrease in accounts receivables.

Answer 6.2-2
A) Accounts Receivable

When a credit memorandum is issued, sales returns and allowances is debited and
accounts receivable is credited, resulting in increase in sales returns and allowances
and decrease in accounts receivables.

Answer 6.2-3
A) the net income for the period to be overstated.
Return of merchandise results in reduction of Sales. Non reduction of sales will result in
overstatement of net income.
counts Payable and a credit to Accounts Receivable and the subsidiary ledger. This error will cause
Answer 6.2-4
A) a credit to an asset account.
Cash to be debited and accounts receivable is credited at the time of collection of
payment from credit customer.

Answer 6.2-5
A) a credit to an asset account.
Cash to be debited and accounts receivable is credited at the time of collection of
payment from credit customer.

Amswer 6.2-6
D) accounts receivable subsidiary ledger.
The amounts owed by each customers is recorded in accounts receivable subsidiary
ledger.

Answer 6.2-7
C) subsidiary ledger.
Every controlling account has its subsidiary ledger.

Answer 6.2-8
D) All of these answers are correct.

Schedule of accounts receivable has list of customer's names with balances and the
total is equal to the accounts receivable control account and is usually prepared at the
end of the month.

Answer 6.2-9
B) The accounts receivable subsidiary ledger is a book of accounts that provides
supporting detail for Accounts Receivable.
 Accounts receivable subsidiary ledger provides supporting detail for Accounts
Receivable.

Answer 6.2-10
C) the control account to not agree with the subsidiary ledger.
Accounts receivable is credited instead of accounts payable. So, the contril account will
not agree with the subsidiary ledger account.

Answer 6.2-11
A) the net income for the period to be understated.
Sales discount will be overstated, resulting in understatement of Net Sales, which
inturn will result in understated net income.
upporting detail for Accounts Receivable.
Answer 6.2-12
D) All of the above are correct.
The accounts receivable subsidiary ledger is recorded in alphabetical order and the
total of all subsidiary accounts match with controlling account. The accounts
receivable account is total of all the account receivable subsidiary ledger account
and is not kept in the same book as accounts receivable.

Answer 6.2-13
A) cash receipts journal.
Cash receipts are recorded in cash receipts journal.
sing a 10% discount rather than a 2% discount in both the controlling and subsidiary accounts. This error will cause
Answer 6.2-14
C) Debit Cash for $990, debit Sales Discount for $10, and credit Accounts Receivable for
$1,000
Discount 1 % * $ 1,000 of $ 10 will be debit and balance $ 990($ 1,000 less $ 10) cash
debited. Credit to accounts receivable for $ 1,000

period on a $1,000 sales invoice, terms 1/10, n/30. Which entry records this transaction?

e for $1,000