Think carefully about each of the following statements. For each one, indicate whether you believe it to be always true, generally true, generally false, or always false. For any item you judge to fall into the last three categories, describe your reasoning.

a. Sales discounts are reported on the income statement as an operating expense.

b. When a company writes off an uncollectible account against Allowance for Doubtful Accounts, the net amount of Accounts Receivables reported on the balance sheet does not change.

c. Jabba Company purchased inventory for its retail store. Jabba should include in the cost of this inventory the amount charged by the freight company to deliver the goods to Jabba’s store.

d. Most retail stores will report three categories of inventory: raw materials, work-in process, and finished goods.

e. When merchandise is sold to customers, the entries to Sales Revenue and Accounts Receivable will be for different amounts than the entries to Merchandise and Cost of

Goods Sold.

f. A purchase of merchandise for later resale to customers has no effect on the income statement.

g. Purchase discounts received from vendors should be deducted when determining and reporting the cost of merchandise.

h. Ford Motor Company just received 1,000 steering wheels for a particular line of cars it manufactures. The cost of these items should be recorded initially in Work-in-Process Inventory.

i. The cost of wages earned by factory employees should be reported on the income statement as Wages Expense during the accounting period in which employees earned them.

j. Diggin Deep Company, a gold mining firm, sold gold bars to Lookin’ Good, Inc. The second firm is a manufacturer of jewelry. Diggin Deep sold finished goods but Lookin’ Good bought raw materials.