Case Study 1

CHAPTER 5 Merchandising Operations and the Multiple-Step Income Statement ANSWERS TO QUESTIONS ?1.(a)Disagree. The steps in the ac waiting cycle atomic number 18 the uniform for both a trade ac club and a helper company. (b)The measurement of income is conceptually the same. In both types of companies, final income (or loss) results from the co-ordinated of expenses with revenue enhancement 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 origin frame the company does not keep track of how many a(prenominal) units be on hand. Instead it takes a physical count at the end of the period to determine ending roll and embody of goods sold. Under a eonian system the company adjusts its stemma account each time it purchases or sells fund. then it eternally h as a record of its available inventory. Having knowledge of inventory balances helps a company avoid lost gross revenue receivable 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 concern 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 service company as follows: (a) sales are the primary source of rev enue and (b) expenses are dissever into tw! ain 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 consistency 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 mediate request to get a full essay, order it on our website: BestEssayCheap.com

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