true and false

1. In a merchandise business, sales minus operating expenses equals net income. 2. Under the periodic inventory system, the cost of merchandise sold is equal to the inventory plus the cost of merchandise purchased plus the ending merchandise inventory 3. Gross profit minus selling expenses equals net inco 4. Other income and expenses are items that are not related to the primary operating activity. 5. The chart of accounts for a merchandise business would include an account called Delivery Expense 6. When companies use a perpetual inventory system, the recording of the purchase of inventory will includ debit to purchases Most companies will not take a purchases discount, because 1% or 2% discounts are insignificant. If the perpetual inventory system is used, an account entitled Cost of Merchandise Sold is included in the 7. 8. general ledger Inventory controls start when the merchandise is shelved in the store area. Of the three widely used inventory costing methods (FIFO, LIFO, and average cost), the LIFO method 9. 10. costing inventory assumes costs are charged based on the most recent purchases first. 11. During periods of increasing costs, an advantage of the LIFO inventory cost method is that it matches m recent costs against current revenues. Unsold consigned merchandise should be included in the consignee's inventory Average inventory is computed by adding the inventory at the beginning of the period to the inventory 12. 13. end of the period and dividing by two. 14. For efficiency of operations and better control over cash, a company should maintain only one bank ac 15. In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement. Multiple Choice Identify the choice that best completes the statement or answers the question Generally, the revenue account for a merchandising business is entitled a. Sales b. Net Sales 16