30 Questions
What is the purpose of offering a cash discount to buyers?
To improve cash flow and reduce the risk of late payments
How is the invoice price calculated?
List price - trade discount
What is the effect of a trade discount on accounts payable?
It decreases accounts payable
What does the notation '2/10, n/30' represent?
2% cash discount if paid within 10 days, net payment due in 30 days
What is the effect of a cash discount on accounts payable?
It decreases accounts payable
What is the purpose of the gross method and net method in accounting for cash discounts?
To account for the different treatments of cash discounts
What is the basis for recording accounts payable when goods are shipped FOB Shipping Point?
Shipment of the goods from the point of shipment
In a FOB shipping point transaction, who is responsible for the payment of freight?
The buyer
Who is responsible for paying the freight charges when the shipping terms are FOB Destination and the freight payment term is Freight Collect?
The buyer
What is the difference between the Gross method and the Net method of recording accounts payable?
The Gross method records accounts payable without the freight charges, while the Net method records it with the freight charges.
What is the effect on Accounts payable when goods are purchased FOB shipping point and the buyer pays the freight?
No effect
When is the liability for accounts payable incurred when the goods are shipped FOB Destination?
When the goods are received at the point of destination
In the case of goods in transit from a vendor to Benzyl Corporation on December 31, 2023, with an invoice cost of P50,000 purchased FOB shipping point, what is the necessary adjustment to be made on Accounts payable?
Increase by P50,000
What is the effect on Accounts payable when goods are purchased FOB destination and the seller pays the freight?
Increase
What is the purpose of segregating freight payment terms into Freight Collect and Freight Prepaid?
To determine who is responsible for paying the freight charges
When the shipping terms are FOB Shipping Point and the freight payment term is Freight Prepaid, who is responsible for paying the freight charges?
The seller
In the case of goods shipped FOB shipping point from a vendor to Benzyl Corporation that was lost in transit, what is the necessary adjustment to be made on Accounts payable?
Increase by P20,000
In the case of goods shipped FOB destination from a vendor to Benzyl Corporation that was received on January 3, 2024, with an invoice cost of P15,000, what is the necessary adjustment to be made on Accounts payable?
Increase by P15,000
What is the total amount of goods purchased by the company that are still in transit as of year-end?
P164,000
How much are the freight charges on the goods purchased on December 28, 2022?
P4,000
What is the amount of goods purchased on December 30, 2022, under terms 2/10 n/30?
P300,000
What is the amount of checks issued to suppliers on December 29, 2022?
P700,000
What is the amount of goods shipped on December 28, 2022, under terms FOB Shipping point?
P240,000
What is the purpose of the adjusting entry related to the three types of checks?
To reverse the previous entry to reflect the outstanding accounts payable
What type of check is a check dated January 3, 2024, written on December 3, 2023, with a reporting date of December 31, 2023?
Postdated check
What is the amount of goods authorized to be returned for full credit?
P160,000
What is the effect of unreleased, stale, and postdated checks on the accounts payable and cash in bank?
Decreases both accounts payable and cash in bank
What is the total value of the checks that are postdated or stale as of December 31, 2023?
P140,000
What is the adjusted balance of accounts payable as of December 31, 2023?
P1,620,000
Why is an adjusting entry necessary for the postdated check dated January 6, 2024?
Because it has not been deducted from cash in bank or added to accounts payable
This quiz covers the concepts of trade discounts and cash discounts in accounts payable. Learn how to calculate the invoice price and understand the terminology used in cash discounts. Test your knowledge of accounts payable and discounts!
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