41. IFRS requires 3 years of income statements, U.S. GAAP requires 2 years of income statements.
42. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are undertaking a project to rework the structure of financial statements. The proposed structure will adopt the major groupings used on the statement of financial position: current and non-current assets and liabilities, followed by equity.
a43.Purchase Returns and Allowances and Purchase Discounts are subtracted from Purchases to produce net purchases.
a44.Freight-in is an account that is subtracted from the Purchases account to arrive at cost of goods purchased.
a45.Under a periodic inventory system, the acquisition of inventory is charged to the Purchases account.
a46.Under a periodic inventory system, freight-in on merchandise purchases should be charged to the Inventory account.
a47.In a worksheet, cost of goods sold will be shown in the trial balance (Dr.), adjusted trial balance (Dr.) and income statement (Dr.) columns.
48. Merchandise inventory is reported as a long-term asset on the statement of financial position.
49. Under a perpetual inventory system, inventory shrinkage and lost or stolen goods are more readily determined.
50. The terms 2/10, n/30 state that a 2% discount is available if the invoice is paid within the first 10 days of the next month.
51. Sales should be recorded in accordance with the expense recognition principle.
52. Sales returns and allowances and sales discounts are subtracted from sales revenue in reporting net sales in the income statement.
53. A merchandising company using a perpetual inventory system will usually need to make an adjusting entry to ensure that the recorded inventory agrees with physical inventory count.
54. If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the income statement.
55. The major difference between the statement of financial position of a service company and a merchandising company is inventory.