True/False Questions (24 Points 26. The operating cycle of a merchandising company consists of (1) purchases of merchandise; (2) sales of the merchandise; and (3) collection of accounts receivable 27.When using a perpetual inventory system, the inventory account is credited when a sale is made 28. Net Sales is computed as total sales revenue less sales returns and allowances less sales discounts. 29.An example of good internal control over cash is to have the person responsible for physically handling all cash perform the bank statement reconciliations. 30.The income statement approach used to estimate uncollectible receivables uses a percentage of credit sales. 31.A major purpose of using an Allowance for Doubtful Accounts is to recognize uncollectible accounts expense in the same accounting period as the related sales which caused the expense. 32. When the direct write-off method is used to recognize uncollectible accounts expense, an Allowance for Doubtful Accounts is still required. 33.The Allowance for Doubtful Accounts is a contra-asset account and appears on the balance sheet. 34.The principle of consistency prohibits a company from changing an inventory valuation method each year. 35. Companies with perpetual inventories need not take physical inventory counts because inventory amounts are perpetually available. 36.When the periodic inventory system is used, determining the cost of the year-end inventory involves two distinct steps: counting the units and pricing the units. 37. A physical inventory is usually taken during a period of high activity