For each true/false statement you answer, insert "T" or "F' in the appropriate space on the separate answer sheet to indicate true or false. 1. 2. 3. 4. 5. 6. 7. 8. Cost of Goods Sold is a contra asset account. When an item is sold FOB destination, title to it passes to the purchaser as soon as it leaves the seller's place of business. When using a periodic inventory system, a company will make no journal entry when it purchases an inventory item. A company using the periodic inventory system would have no need for a Transportation-in account. When using the periodic inventory system, the company would close out the Purchases account at the end of the year. A periodic inventory system updates the Merchandise Inventory account each time the company sells an inventory item. When using the "net" method to record discounts on the cost of inventory purchaser, the purchaser is prohibited from actually taking the discount. A company's gross profit percentage will decrease if its cost of goods sold amount as a percentage of sales decreases. A merchandising company's operating cycle begins with the purchase of inventory Sales minus cost of goods sold equals goods available for sales. A perpetual inventory system provides for better inventory control than a periodic inventory system. The cost of an inventory item includes the freight cost to ship the item to the purchaser if the purchaser is responsible for payment of the freight cost. When an item is sold FOB shipping point, the seller is responsible for payment of the freight cost to send it to the purchaser. A company using a perpetual inventory will have no need for a Purchases account. A company using the periodic inventory method must take a physical inventory at the end of the accounting period. 9. 10. 11. 12. 13. 14. 15