121. With a perpetual inventory system, the cost of merchandise inventory is recognized at the time of purchase.
122. With a perpetual inventory system, assets and equity increase by the amount of the gross margin when inventory is sold.
123. In a perpetual inventory system, a purchase allowance is treated as a decrease in expenses by the company that purchased the goods.
124. A company that purchases merchandise treats a cash discount as a reduction to the cost of merchandise inventory.
125. Melbourne Company sold merchandise that it had purchased with a list price of $3,300 and subject to terms of 2/10, n/30. Assuming that Melbourne paid for the merchandise during the discount period, the cost of goods sold for this transaction would be $2,970.
126. The income statement is not affected by a purchase of merchandise.
127. The term "FOB shipping point" indicates that the seller is responsible for transportation costs.
128. A company using a perpetual inventory system treats transportation-out as a selling and administrative expense.
129. Gains and losses are recorded for increases and decreases in the market value of assets such as land.
130. A multistep income statement shows Sales, Cost of Goods Sold, and Gross Margin.