Indicate whether the following statements are true or false. If false, indicate how to correct the statement.
1. A merchandising company reports gross profit but a service company does not.
2. Under a periodic inventory system, a company determines the cost of goods sold each time a sale occurs.

3. A service company is likely to use accounts receivable but a merchandising company is not likely to do so.
4. Under a periodic inventory system, the cost of goods on hand at the beginning of the accounting period plus the cost of goods purchased less the cost of goods on hand at the end of the accounting period equals cost of goods sold.