5&6

5. Under the periodic system, which of periodic system, which of the following occurs when a company must pay freight charges on merchandise it purchases for resale? a. Transportation-in is added to the inventory account. b. Transportation-in is subtracted from purchases. c. Freight charges are paid by the buyer. 4. Transportation-in is included in the total cost of purchases used to determine cost of goods sold. 6. You are Chief Financial Officer for Five Star Resorts, Inc. You are reviewing the following transactions: 1) adding a new patio deck to the resort's oceanside bar, $180,000 11) annual painting of the oceanfront beach houses, $75,000 Refer to Five Star Resorts, Inc. What is the appropriate accounting treatment of the cost of painting the oceanfront beach houses? a. The cost of painting the oceanfront beach houses should be capitalized and depreciated over the remaining useful life of the beach houses as originally estimated. b. The cost of painting the oceanfront beach houses should be capitalized and depreciated over a new "extended" life of the beach houses. c. The cost of painting the oceanfront beach houses should be expensed in the period incurred. d. The cost of painting the oceanfront beach houses should be deducted immediately from retained earnings