NAME: Lorly Jean B.

Labad
SECTION: 13

INSTRUCTION: Write TRUE, on the space provided before the number, if the statement is correct, and FALSE if otherwise.

TRUE 1. The Sales Discount account is a contra-income account and will have a debit balance.
TRUE 2. The Perpetual Inventory System requires recording the cost of each sales as it occurs.
TRUE 3. The Periodic Inventory System relies on a physical count of merchandise for its balance sheet amount
FALSE 4. The purchase of equipment not for resale should be debited to the Purchases account.
TRUE 5. Advertising Expense appears as a Distribution Cost on the Income Statement.
TRUE 6. The Chart of Accounts for a Merchandising Entity differs from that of a Service Entity.

FALSE 7. A credit term of "2/10, n/30" means that the buyer may deduct 2% from the invoice if payment is made within
TRUE 8. For cash sales, operating cycle is from Cash to Inventory to Accounts Receivable and back to Cash.
TRUE 9. The two main systems for accounting for merchandise are Periodic and Perpetual.
TRUE 10. Transportation In is considered a cost of merchandise purchased.
TRUE 11. Cash Discounts are called Purchases Discounts from the buyer's viewpoint.
TRUE 12. The Merchandise Inventory account is not affected when a Sales Allowance is granted.
TRUE 13. Then Ending Inventory of one period is the Beginning Inventory of the next period.
FALSE 14. The Term Freight Prepaid or Collect will dictate who shoulders the transportation costs.
TRUE 15. Purchases Returns and Allowances is a deduction from purchases.
TRUE 16. A validated deposit slip indicates that cash and checks were actually deposited.
TRUE 17. If the seller is to shoulder the cost of delivery, the term is stated as F.O.B destination.
FALSE 18. Discounts offered to the buyer to encourage early payment are trade discounts.
TRUE 19. Sales Returns and Allowances is described as a contra-revenue account.
TRUE 20. The Income Statement of an entity that provides services only will not have Cost of Goods Sold.
FALSE 21. Under the Periodic Inventory System, Cost of Goods Sold is treated as an account.
TRUE 22. Under the Periodic Inventory System, the purchases account is used to accumulate all purchases of merchand
TRUE 23. A physical inventory is usually taken at the end of the accounting period.
TRUE 24. Goods should be recorded at their list price less any trade discounts involved.
TRUE 25. Under the Perpetual Inventory System, the cost of merchandise is debited to Merchandise Inventory at the tim
TRUE 26. Taking a physical inventory refers to making a count of all merchandise on hand at a particular time.
TRUE 27. Merchandise Inventory could include that are in transit.
FALSE 28. Transportation Out is included in the Cost of Goods Sold calculation.
TRUE 29. The bill of lading is a document prepared by the seller detailing the terms of delivery.
TRUE 30. Under the Periodic Inventory System, purchase of merchandise are not recorded in the Merchandise Inventor
nd FALSE if otherwise.

ce sheet amount
t.

f payment is made within 10 days from the end of the month.

back to Cash.

ed.

sts.

n.

Goods Sold.

all purchases of merchandise for resale.

andise Inventory at the time of purchase.

particular time.

y.
the Merchandise Inventory System.