A sales discount represents a reduction

I. TRUE OR FALSE (Write T if true; F if false)1. Trade discounts represent a discount offered to the purchasers for quick payment. _____

2. When a company sells a $100 service with a 20% trade discount, $80 of revenue is recognized. _____

3. A sales discount represents a reduction, not in the selling price of a product or service, but in the amountto be paid by a credit customer if payment is made within a specified period of time. _____

4. A sales on account for $1,000 offered with terms 2/10, n/30 means that the customers will get a $2discount if payment is made within 10 days; otherwise, full payment is due within 30 days. _____

5. The Sales Discounts account is an expense account. _____

6. A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances. _____

7. The Sales Returns account is an expense account. _____

8. If a company has total sales revenues of $100,000, sales discounts of $3,000, sales returns of $4,000, andsales allowances of $2,000, the income statement will report net revenues of $91,000. _____

9. Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in theincome statement. _____

10. If a company has beginning inventory of $15,000, purchases during the year of $75,000, and endinginventory of $20,000, cost of goods sold equals $70,000. _____


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