TRUE or FALSE. Write TRUE if the statement is correct. Write FALSE if the statement is incorrect and identify the word/group of words that made the statement incorrect.

1.The Sales Discounts account is a contra-income account and will -have a debit balance.

2.The perpetual inventory system requires recording the cost of each sale as it occurs.

3.The periodic inventory system relies on a physical count of merchandise for its balance sheet amount.

4.The purchase of equipment not for resale should be debited to the Purchases account.

5.Advertising Expense appears as a Distribution Cost on the income statement.

6.The chart of accounts for a merchandising entity differs from that of a service entity.

7.A credit term of "2/10, n/3011 means that the buyer may deduct 2% from the invoice if payment is made within 10 days from the end of the month.

8.For cash sales, the operating cycle is from Cash to Inventory to Accounts Receivable and back to Cash.

9.The two main systems for accounting for merchandise are periodic and perpetual.

10. Transportation In is considered a cost of merchandise purchased.

11. Cash discounts are called Purchases Discounts from the buyer's viewpoint.

12. The Merchandise Inventory account is not affected when a sales allowance is granted.

13. The ending inventory of one period is the beginning inventory of the next period.

14. The term freight prepaid or collect will dictate who shoulders the transportation costs.

15. Purchases Returns and Allowances is a deduction from Purchases.

16. A validated deposit slip indicates that cash and checks were actually deposited.

17. If the seller is to shoulder the cost of delivery, the term is stated as F.O.B. destination.

18. Discounts offered to the buyer to encourage early payment are trade discounts.

19. Sales Returns and Allowances is described as a contra-revenue account.

20. The income statement of an entity that provides services only will not have Cost of Goods Sold.

21. Under the periodic inventory system, Cost of Goods Sold is treated as an account.

22. Under the periodic inventory system, the Purchases account is used to accumulate all purchases of merchandise for resale.

23. A physical inventory is usually taken at the end of the accounting period.

24. Goods should be recorded at their list price less any trade discounts involved.

25. Under the perpetual inventory system, the cost of merchandise is debited to Merchandise Inventory at the time of purchase.

26. Taking a physical inventory refers to making a count of all merchandise on hand at a particular time.

27. Merchandise Inventory could include goods that are in transit.

28. Transportation Out is included in the Cost of Goods Sold calculation.

29. The bill of lading is a document prepared by the seller detailing the terms of delivery.

30. Under the periodic inventory system, purchases of merchandise are not recorded in the Merchandise Inventory account.