Problem I: (15 pts) Indicate whether each of the following statements is true (T) or false (F).

a. Both purchase returns and sales returns reduce the cost of inventory.

b. Concerning shipping terms, freight-in costs are typically treated as operating expenses whereas freight-out costs are typically included in the cost of goods sold.

c. Net purchases is calculated by taking the cost of new inventory purchases minus freight-in minus purchase discounts minus purchase returns and allowances.

d. The cost of beginning inventory plus the cost of net purchases for the period is equal to an amount described as the cost of inventory available for sale or goods available for sale.

e. Under current tax laws in the United States, a company which uses the LIFO method for tax purposes must also use the LIFO method for financial reporting purposes.

f. Under current tax laws in the United States, a company which uses the FIFO method for tax purposes must also use the FIFO method for financial reporting purposes.

g. International Financial Reporting Standards (IFRS) permit the use of FIFO, LIFO, and the average cost method for financial reporting purposes.

h. GAAP allows companies to switch inventory methods back and forth (ex. FIFO to LIFO) from year to year based upon which method maximizes the companys net income.

i. When inventory is shipped with terms F.O.B. destination point, the seller should pay the freight charges.

j. The periodic and perpetual inventory systems will yield the same cost of goods sold and cost of ending inventory amounts when the FIFO cost flow assumption is used.