Case Study 1

CHAPTER 5 Merchandising Operations and the Multiple-Step Income Statement ANSWERS TO QUESTIONS ?1.(a)Disagree. The steps in the ac cyphering cycle atomic number 18 the alike for both a merchandise ac party and a dish out company. (b)The measurement of income is conceptually the same. In both types of companies, final income (or loss) results from the twinned of expenses with tax income enhancements. ?2.The components of revenues and expenses differ as follows: | | Merchandising| | Service| RevenuesExpenses| | sales exist of Goods interchange and Operating| | Fees, Rents, etc.Operating (only)| ?3.Under a periodic pedigree frame the company does not keep track of how many another(prenominal) units be on hand. Instead it takes a physical count at the end of the period to determine ending memorandum and embody of goods sold. Under a eonian system the company adjusts its chronicle account each time it purchases or sells history. therefrom it eternally has a record of its available inventory. Having knowledge of inventory balances helps a company avoid lost sales cod to stock-outs as well as carrying too much inventory on hand (which results in additional storage and use costs). The get department can make better decisions with the support of perpetual inventory records. ?4.

(a)The income measurement process is as follows: SalesRevenue| little| 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 pri mary source of revenue and (b) expenses are ! divided 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 agreement 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 validatory request to get a full essay, order it on our website: BestEssayCheap.com

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