True/False Indicate whether the statement is true or false. 1. In a periodic inventory system, the cost of merchandise purchased includes the cost of freight-in. 2. Under a periodic inventory system, the merchandise on hand at the end of the year is determined by a physical count of the inventory. 3. Under the perpetual inventory system, a company purchases merchandise on terms 2/10, n/30. If payment is made within 10 days of the purchase, the entry to record the payment will include a credit to Cash and a credit to Purchase Discounts. 4. Net sales is equal to sales minus cost of merchandise sold. 5. A buyer who acquires merchandise under credit terms of 1/10, n/30 has 30 days after the invoice date to take advantage of the cash discount. 6. Gross profit minus selling expenses equals net income. 7. A deduction allowed to wholesalers and retailers from the price of merchandise listed in catalogs is called cash discounts. 8. The seller may prepay the freight costs even though the terms are FOB shipping point. 9. If the buyer bears the freight costs related to a purchase, the terms are said to be FOB destination. 10. As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet 11. Other income and expenses are items that are not related to the primary operating activity. 12. Merchandise Inventory normally has a debit balance. 13. In the Merchandising Income Statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales