Exercises Answer general questions about merchandisers. E5.1 (LO 1), C Mr. Etemadi has prepared the following list of statements about service companies and merchandisers. 1. Measuring net income for a merchandiser is conceptually the same as for a service company. 2. For a merchandiser, sales less operating expenses is called gross profit. 3. For a merchandiser, the primary source of revenue is the sale of inventory. 4. Sales salaries and wages is an example of an operating expense. 5. The operating cycle of a merchandiser is the same as that of a service company. 6. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained in the Inventory account. 7. In a periodic inventory system, the cost of goods sold is determined only at the end of the reporting period. 8. A periodic inventory system provides better control over inventories than a perpetual system. Instructions Identify each statement as true or false. If false, indicate how to correct the statement. Journalize purchase transactions. E5.2 (LO 2), AP Information related to Rice Co. is presented below. 1. On April 5, purchased merchandise on account from Jax Company for $28,000, terms 2/10, net/30, FOB shipping point. 2. On April 6, paid freight costs of $700 on merchandise purchased from Jax. 3. On April 7, purchased equipment on account for $30,000. 4. On April 8, returned $3,600 of merchandise to Jax Company. 5. On April 15, paid the amount due to Jax Company in full. Instructions a. Prepare the journal entries to record these transactions on the books of Rice Co. under a perpetual inventory system. b. Assume that Rice Co. paid the balance due to Jax Company on May 4 instead of April 15. Prepare the journal entry to record this payment