A Company Using the Gross Method of Accounting for Purchases

question 173

Multiple Choice

A company using the gross method of accounting for purchases and a perpetual inventory system recorded the following entry: This entry reflects a:

• A)Purchase of merchandise on credit.
• B)Return of merchandise.
• C)Sale of merchandise on credit.
• D)Payment of the account payable less a 2% cash discount taken.
• E)Payment of the account payable less a 1% cash discount taken.

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Definitions:

Auditing Standards Board

The body responsible for issuing auditing, attestation, and quality control standards for audits of non-public entities in the United States.

Federal Agency

A unit of the federal government in the United States established by Congress to enforce laws and regulations in a specific area.