1. Under the perpetual inventory system, when merchandise is sold, its cost is transferred from the
MErchandise Inventory account to the Sales account.
A) true
B) false
Which of the following is not considered a long-term obligation?
A. deferred income taxes
B. contributed capital
C. capital lease
D.pension liabilities.
Solution
B) False
Because once it is sold, cost is transferred from the Merchandise Inventory account to cost of
goods sold a/c.
______________________________________________________________________________
__
B) contributed capital
deferred income taxes , capital lease, pension liabilities. all are considered as long term
obligation it means willing to pay others but contributed capital is owner conributed the amount
not to pay for others.
As per equation= Assets = Liabilties + equity(capital)

2. ______________________________________________________________________________
___