TRUE or FALSE? Directions: Read each question carefully, then indicate whether it is True (T) or False (F).

_____1. A company either performs a service, sells inventory that it purchases from others, or manufacturers a product; it cannot serve more than one of these functions.

_____2. A retailer is company that buys products from manufacturers and sells them to wholesalers.

_____3. A merchandising companys operating cycle begins with the acquisition of inventory and ends with the cash collection from sales.

_____4. FOB shipping point means that ownership of goods passes to the buyer when the goods leave the sellers place of business.

_____5. Sales discounts are discounts that consumers get from buying clearance items at a reduced price.

_____6. Many companies report sales revenue, sales returns and allowances, and sales discounts, as well as net sales on their externally-reported income statements. _____7. When a periodic inventory system is in use, the Inventory account is updated only at the end of the period.

_____8. When costs per unit are increasing, the inventory costing method that results in the lower income tax expense is the LIFO method.

_____9. In each accounting period, a manager can select the inventory costing method that yields the highest net income.

_____10. If a company uses LIFO to prepare its U.S. tax return, then it must use LIFO to prepare its financial statements.

_____11. Lower of Cost or Market can be applied on an item or total inventory basis.

_____12. Goods in transit are inventory items being transported from a seller to a buyer.

_____13. Credit card companies charge a fee to the seller that accepts the credit cards. This fee is recorded by the seller as a selling expense on the Income Statement.