Case Study 1

CHAPTER 5 Merchandising Operations and the Multiple-Step Income Statement ANSWERS TO QUESTIONS ?1.(a)Disagree. The steps in the ac attending cycle atomic number 18 the selfsame(prenominal) for both a merchandising ac fellowship and a helping company. (b)The measurement of income is conceptually the same. In both types of companies, final income (or loss) results from the interconnected of expenses with tax revenue enhancements. ?2.The components of revenues and expenses differ as follows: | | Merchandising| | Service| RevenuesExpenses| | gross revenue exist of Goods interchange and Operating| | Fees, Rents, etc.Operating (only)| ?3.Under a periodic livestock frame the company does not keep track of how many an(prenominal) units be on hand. Instead it takes a physical count at the end of the period to determine ending register and embody of goods sold. Under a eonian system the company adjusts its line of descent account each time it purcha ses or sells list. hence it eternally has a record of its available inventory. Having knowledge of inventory balances helps a company avoid lost gross sales imputable to stock-outs as well as carrying too much inventory on hand (which results in additional storage and discourse costs). The get department can make better decisions with the attention of perpetual inventory records. ?4.

(a)The income measurement process is as follows: SalesRevenue| slight| Cost ofGoodsSold| Equals| GrossProfit| Less| OperatingExpenses| Equals| NetIncome| (b)Income measurement in a merchandising company differs from a ser vice company as follows: (a) sales are the ! primary source of revenue and (b) expenses are change integrity into twain main categories: cost of goods sold and operating expenses. ?5.Sales revenue$100,000 Cost of goods sold??70,000 Gross profit$?30,000 ?6.Agree. In harmoniousness with the revenue recognition principle, sales revenues are generally considered to be earned when the goods are transferred from the seller to the buyer; that is, when the exchange transaction...If you verifying request to get a full essay, order it on our website: BestEssayCheap.com

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