121. With a perpetual inventory system, assets and equity increase by the amount of the gross margin.
122. A purchase allowance is treated as a decrease in expenses by the company that purchased the goods.
123. A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.
124. Omega Company sold merchandise that it had purchased with a list price of $6,500 and subject to terms of 2/10, n/30. Assuming that Omega paid for the merchandise during the discount period, the cost of good sold for this transaction would be $6,370.
125. The income statement is not affected by a purchase of merchandise.
126. The term "FOB shipping point" indicates that the seller is responsible for transportation costs.
127. A company using a perpetual inventory system treats transportation-out as part of the cost of merchandise.
128. Gains and losses are recorded for increases and decreases in the market value of assets such as land.
129. A multistep income statement shows Sales, Cost of Goods Sold, and Gross Margin.
130. A multistep income statement separates routine operating results from peripheral or nonoperating items.