1. Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business. True or False

2. The merchandise inventory account is found on the balance sheet. True or False

3. Net income or loss may appear on the income statement of both a service business and a merchandising business. True or False

4. The sales discount account is a contra account to Sales. True or False

5. Under the perpetual inventory system, the cost of merchandise sold is recorded when sales are made. True or False

6. A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount. True or False

7. When the terms of sale are FOB shipping point, the buyer should pay the transportation charges. True or False

8. If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $52. True or False

9. When someone purchases merchandise and incurs the cost of transportation, these costs of purchasing inventory are added to the cost of the inventory. True or False

10. Merchandise inventory shrinkage will decrease Retained Earnings. True or False