TRUE OR FALSE (please explain so i can study it even more, thanks)

1. A trade discount is taken in the books of the seller as an expense.

2. If the seller advances the payment of a freight that is chargeable to the buyer, the seller should issue a debit memo for the same amount.

3. Under the perpetual inventory system, the cost of sale is determined every time a sale is made.

4. All credit sales are recorded in the same manner regardless whether the available discount is taken or not.

5. The amount of purchase discount is computed based on the net account payable and not on the net purchases.

6. If a customer returns merchandise after taking a cash discount with the payment, the customer will receive credit equal to the original invoice value of the merchandise.

7. In determining the cost of sale under the periodic inventory system, the freight-in is added to purchases.

MULTIPLE CHOICE (please explain, thanks!)

1. Which of the following is period cost that is not directly related to revenue earned?*

[a] Cost of sales

[b] Operating expenses

[c] both of the choices

[d] none of the choices

2. Which of the following is the income representing the difference between the sales and cost of sales?*

[a] Gross profit

[b] Operating income

[c] Net operating income

[d] Net income before tax

3. Which of the following is reported as part of the operating expenses?*

[a] Cost of sales

[b] Freight-in

[c] Freight-out

[d] Sales allowance

4. Which of the following is reported as selling expense?*

[a] Sales discount

[b] Sales return

[c] Sales allowance

[d] Freight-out

5. In which of the following arrangements does the freight become the expense of the buyer?*

[a] FOB destination, collect

[b] FOB shipping point, collect

[c] FOB destination, prepaid

[d] None of the choices

6. Which of the following will increase the gross profit of the merchandising business?*

[a] Increase in purchase discount

[b] Increase in freight-in

[c] Decrease in freight-out

[d] Increase in purchase return

7. In which of the following will the supplier be issuing a credit note?*

[a] Granting of trade discount to buyer

[b] Granting of allowance to buyer for defective merchandise

[c] Granting of volume discount to the buyer

[d] All of the choices

8. Which of the following is to be included in the inventory of the seller?*

[a] Goods in transit sold under FOB destination

[b] Goods in transit sold under FOB shipping point

[c] Both a and b

[d] none of the choices

9. Which of the following is not recorded in the books of accounts?*

[a] Cash discount

[b] Sales discount

[c] Purchase discount

[d] Volume discount

10. Which of the following is being adjusted by a purchase discount?*

[a] Purchases

[b] Accounts receivable

[c] Sales

[d] All of the choices