Reference no: EM132778330

Problem 1: Chamberlain Company buys designer clothing to sell in its retail stores. Since much of the merchandise comes from Dallas and Europe, Chamberlain Company must pay freight charges to get the merchandise shipped in. Which of the following statements is true?

a. Transportation-in, paid by Chamberlain Company, is subtracted from purchases under the periodic system.
b. Transportation-in is added to net purchases to determine cost of goods purchased in a periodic system.
c. Freight charges are only paid by a buyer in a periodic system.
d. Transportation-in, paid by Chamberlain Company, is added to the inventory account under the periodic system.

Problem 2: For what reason might retailers like Target select an accounting period that ends on or near the end of January?

a. The company's CPAs are attempting to spread out the workload.
b. The Internal Revenue Service requires merchandise companies to select such a date for their fiscal year.
c. The company originally started business operations on that date so it is required to use the date as fiscal year-end.
d. Business activity is in a slow period that is suited to the preparation of its financial statements at the end of the year.