Louisiana State University, Shreveport

ACCT 701

CHAPTER 7

1)The accounting for all three of these is covered in this text.

2. (T / F) A trade discount is a discount offered at the time of sale to encourage the customer to buy.
3.  (T / F) Sales discounts arise when the seller offers the buyer a cash discount, typically 1 to 3 percent, to induce early payment of an amount due.
4.  (T / F) Cost of goods sold = Beginning inventory + Net cost of purchases − Ending inventory.

5. (T / F) Beginning inventory + Net cost of purchases = Cost of goods available for sale.

6. (T / F) A classified income statement has four major sections—operating revenues, cost of goods sold, operating expenses, and non-operating revenues and accounts receivables.
7.  (T / F) Non-operating revenues and expenses are revenues and expenses not related to the sale of products or services regularly offered for sale by a business.

8. (T / F) The two basic methods for estimating uncollectible accounts under the allowance method are the percentage-of-cost of sales method and the percentage-of-receivables method.
9.  (T / F) Liabilities result from some past transaction and are obligations to pay cash, provide services, or deliver goods at some time in the future.

10. (T / F) Generally, the lower the accounts receivable turnover, the better; and the shorter the average collection period, the better.