Required: Identify each statement as true or false. If false, indicate how to correct the statement

Mr. McKenzie had prepared the following list of statements about service companies and merchandisers. 1. For a merchandise, sales less operating expenses is called gross profit. 2. For a merchandiser, the primary source of revenue is the sale of inventory. 3. The operating cycle of a merchandiser is the same as that of a service company. 4. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained. 5. In a periodic inventory system the cost of goods sold is determined only at the end of the accounting period. 6. A periodic inventory system provides better control over inventories than a perpetual system. 7. Freight terms of FOB Destination means that the buyer pays the freight costs. 8. The revenue recognition principle requires retailers to recognise sales revenue when it is earned which is not necessarily the same time that the cash is received. 9. Sales Allowances and Sales Discount are both designed to encourage customers to pay their accounts promptly. 10. A retailer using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count. 11. Under a periodic inventory system, freight-in on inventory purchases should be charged to the inventory account. 12. Each of the required steps in the accounting cycle for a service company applies to a merchandising company. Required