A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.
True or False
True
A purchase discount reduces merchandise inventory and accounts payable of the buyer.
A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.
True False
True. cash discounts are a reduction to the cost of merchandise inventory. When a cash discount is received accounts payable is debited and merchandise inventory is credited.
Merchandise businesses sell goods primarily to other businesses.
True False
FALSE
Merchandise businesses primarily sell goods to the public.
Merchandising businesses include retail companies and wholesale companies.
True False
TRUE
Retailers and wholesalers are both merchandising companies.
Costs of selling inventory are product costs and are included in the costs of inventory.
True False
FALSE
Selling costs are period costs. Period costs do not get added to the costs of inventory.
Costs added to the Merchandise Inventory account are product costs.
True False
TRUE
Product costs are added to the merchandise inventory account.
Selling costs are recognized as expenses in the period when goods are sold.
True False
FALSE
Selling costs are recognized as expenses in the period in which they are incurred.
