Accounts Payable and Discounts
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Questions and Answers

What is the purpose of offering a cash discount to buyers?

  • To improve cash flow and reduce the risk of late payments (correct)
  • To discourage early payment of an invoice
  • To increase the list price of merchandise
  • To encourage late payments

    • How is the invoice price calculated?

  • List price + cash discount - trade discount
  • List price - trade discount - cash discount
  • List price + trade discount + cash discount
  • List price - trade discount (correct)

    • What is the effect of a trade discount on accounts payable?

  • It has no effect on accounts payable
  • It is added to accounts payable
  • It decreases accounts payable (correct)
  • It increases accounts payable

    • What does the notation '2/10, n/30' represent?

    <p>2% cash discount if paid within 10 days, net payment due in 30 days</p> Signup and view all the answers

    What is the effect of a cash discount on accounts payable?

    <p>It decreases accounts payable</p> Signup and view all the answers

    What is the purpose of the gross method and net method in accounting for cash discounts?

    <p>To account for the different treatments of cash discounts</p> Signup and view all the answers

    What is the basis for recording accounts payable when goods are shipped FOB Shipping Point?

    <p>Shipment of the goods from the point of shipment</p> Signup and view all the answers

    In a FOB shipping point transaction, who is responsible for the payment of freight?

    <p>The buyer</p> Signup and view all the answers

    Who is responsible for paying the freight charges when the shipping terms are FOB Destination and the freight payment term is Freight Collect?

    <p>The buyer</p> Signup and view all the answers

    What is the difference between the Gross method and the Net method of recording accounts payable?

    <p>The Gross method records accounts payable without the freight charges, while the Net method records it with the freight charges.</p> Signup and view all the answers

    What is the effect on Accounts payable when goods are purchased FOB shipping point and the buyer pays the freight?

    <p>No effect</p> Signup and view all the answers

    When is the liability for accounts payable incurred when the goods are shipped FOB Destination?

    <p>When the goods are received at the point of destination</p> Signup and view all the answers

    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?

    <p>Increase by P50,000</p> Signup and view all the answers

    What is the effect on Accounts payable when goods are purchased FOB destination and the seller pays the freight?

    <p>Increase</p> Signup and view all the answers

    What is the purpose of segregating freight payment terms into Freight Collect and Freight Prepaid?

    <p>To determine who is responsible for paying the freight charges</p> Signup and view all the answers

    When the shipping terms are FOB Shipping Point and the freight payment term is Freight Prepaid, who is responsible for paying the freight charges?

    <p>The seller</p> Signup and view all the answers

    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?

    <p>Increase by P20,000</p> Signup and view all the answers

    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?

    <p>Increase by P15,000</p> Signup and view all the answers

    What is the total amount of goods purchased by the company that are still in transit as of year-end?

    <p>P164,000</p> Signup and view all the answers

    How much are the freight charges on the goods purchased on December 28, 2022?

    <p>P4,000</p> Signup and view all the answers

    What is the amount of goods purchased on December 30, 2022, under terms 2/10 n/30?

    <p>P300,000</p> Signup and view all the answers

    What is the amount of checks issued to suppliers on December 29, 2022?

    <p>P700,000</p> Signup and view all the answers

    What is the amount of goods shipped on December 28, 2022, under terms FOB Shipping point?

    <p>P240,000</p> Signup and view all the answers

    What is the purpose of the adjusting entry related to the three types of checks?

    <p>To reverse the previous entry to reflect the outstanding accounts payable</p> Signup and view all the answers

    What type of check is a check dated January 3, 2024, written on December 3, 2023, with a reporting date of December 31, 2023?

    <p>Postdated check</p> Signup and view all the answers

    What is the amount of goods authorized to be returned for full credit?

    <p>P160,000</p> Signup and view all the answers

    What is the effect of unreleased, stale, and postdated checks on the accounts payable and cash in bank?

    <p>Decreases both accounts payable and cash in bank</p> Signup and view all the answers

    What is the total value of the checks that are postdated or stale as of December 31, 2023?

    <p>P140,000</p> Signup and view all the answers

    What is the adjusted balance of accounts payable as of December 31, 2023?

    <p>P1,620,000</p> Signup and view all the answers

    Why is an adjusting entry necessary for the postdated check dated January 6, 2024?

    <p>Because it has not been deducted from cash in bank or added to accounts payable</p> Signup and view all the answers

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