Book 2 - Chapter 20

Multiple Choice

1.	d
2.	c	Note that this is a discount that reduces the invoice price, before the purchase discount is applied.
3.	a
4.	c
5.	a
6.	d
7.	c	Calculation of cash payment: $7,000 × .98 = $6,860. $140 difference is the discount.
8.	a	No shipping costs for buyer because they are paid by seller to the destination.
9.	b	If you record a purchase at the net amount, all returns, allowances, etc., must also be at the net amount.
10.	a	$161,850 – $8,100 = $153,750.
11.	c
12.	d
13.	c	$18/($18 + $582) = .03
14.	a	$3,300/.97 = $3,402.06. Because the payment is within the discount period, it is cosidered to be “net of” the 3% discount; that is, the amount after subtracting the discount. Therefore, you must ask: “$3,300 is 97% of what number? To check your answer, multiply $3,402.06 times .97.

Learning Goal 20

SOLUTIONS

Learning Goal 20: Explain and Use the Periodic Inventory Method

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