Financial Accounting Ch05

Companies using International Financial Reporting Standards (IFRS) use a perpetual inventory system, while companies using U.S. GAAP use a periodic inventory system.

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• false

Companies using a perpetual inventory system report credit purchases of inventory on the statement of financial position by increasing inventory and decreasing liabilities.

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• false

Companies using a perpetual inventory system record all credit purchases by increasing inventory and increasing liabilities.

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• false

Global Care uses a perpetual inventory system and purchased wheelchairs under terms FOB destination. The freight charges associated with the wheelchairs will be added to the inventory account.

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When the buyer pays an invoice within the discount period, the amount of the discount increases the inventory account.

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• false

Inventory purchased for $2,500 subject to terms 2/10, net 30 could end up being reported on the statement of financial position at an amount greater than $2,500 if the discount isn’t taken by the buyer.

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• false

Purchase returns are recorded by the buyer as a decrease to inventory.

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• false

Freight terms of FOB Destination means that the seller pays the freight costs.

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• false

Freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller.

• true

• false

Sales revenues are earned during the period cash is collected from the buyer.

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• false