Short Answer (12 points each)

1. Briefly explain in your own words why discounts taken on purchases of inventory are properly deducted from the purchase price when calculating the amount that should be added to Merchandise Inventory.

2. In your own words, describe how monthly preparation of a bank reconciliation helps support an organizations overall internal control objectives. Please do not describe how to prepare the reconciliation, because that is not an answer to the question.

3. A certain business owns a patent and a piece of machinery used in manufacturing. How will calculating and reporting amortization for the patent resemble calculating and reporting depreciation on the machine? How will they differ?