1. The cost of merchandise inventory includes which of the following:

a. Costs incurred to buy the goods.

b. Costs incurred to ship the goods to the store(s).

c. Costs incurred to make the goods ready for sale.

d. Both a and b.

e. a, b, and c.

2. Prepare journal entries to record each of the following purchases transactions of a merchandising company.

Show supporting calculations and assume a perpetual inventory system.

Mar. 5 Purchased 500 units of product at a cost of $5 per unit. Terms of the sale are 2/10, n/60; the invoice is dated March 5.

Mar. 7 Returned 50 defective units from the March 5 purchase and received full credit.

Mar. 15 Paid the amount due from the March 5 purchase, less the return on March 7.