Directions: Each of the following statements is true or false. Indicate your choice by writing in the Answers column T for a true answer or F for a false answer. (2 points for each correct answer) For Scoring Answers 1. For a merchandising business, purchases refers to the merchandise acquired for resale to customers. 2. When merchandise is received, a purchase invoice indicating what has been received is prepared by the buyer. 3. A purchase order is prepared by the seller and sent to the buyer with the shipment 4. To offer a trade discount, a company must print a special catalog each time there is a change in prices. 5. Discounts from invoice prices, which act as an inducement for prompt payment of invoices, are called cash discounts. 6. Trade discounts represent a reduction in the price of the merchandise but are not entered in the accounts of either the seller or the buyer. 7. If the terms specified on an invoice are 2/15, n/30, this means that a discount of 2% will be allowed if payment is made within 15 days from the date of the invoice. 8. The purchases account is used to record the cost of goods purchased for resale. 9. Purchases should be recorded in the journal at the net amount after deducting any allowed trade discounts. 10. If the merchandise received is damaged or unsatisfactory or if the prices charged are not in accordance with an existing agreement, an adjustment may be made that is referred to as a discount. 11. Transportation charges paid to ship purchases are credited to Freight-In. 12. Gross profit and net income refer to the same information. 13. Cost of goods sold is the difference between the goods available for sale and the ending inventory. 14. Under the gross-price method, the difference between the original amount due and the cash paid is credited to Purchases Discount. 15. Individual supplier information can be found in the accounts payable ledger