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 like for both a merchandising ac phoner and a renovation company. (b)The measurement of income is conceptually the same. In both types of companies, final income (or loss) results from the unified of expenses with tax 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 lineage frame the company does not keep track of how umpteen units be on hand. Instead it takes a physical count at the end of the period to determine ending account and embody of goods sold. Under a eonian system the company adjusts its schedule account each time it purchases or sells inventory. therefrom it eternally has a record of its available inventory. Having knowledge of inventory balances helps a company avoid lost gross sales payable 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 attend to 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 sou rce of revenue and (b) expenses are disseve! r 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 unity 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 corroboratory request to get a full essay, order it on our website: OrderCustomPaper.com

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