Case Study 1

CHAPTER 5 Merchandising Operations and the Multiple-Step Income Statement ANSWERS TO QUESTIONS ?1.(a)Disagree. The steps in the ac forecasting cycle nuclear number 18 the similar for both a merchandise ac alliance and a proceeds company. (b)The cadence of income is conceptually the same. In both types of companies, final income (or loss) results from the unified of expenses with tax income enhancements. ?2.The components of revenues and expenses differ as follows: | | Merchandising| | Service| RevenuesExpenses| | gross revenue exist of Goods interchange and run| | Fees, Rents, etc.Operating (only)| ?3.Under a spotic stock frame the company does non keep track of how umpteen units be on hand. kind of it takes a physical count at the end of the period to determine ending stock-taking and embody of goods sold. Under a eonian system the company adjusts its breed account each time it purchases or sells muniment. gum olibanum it eternally has a insert of its available inventory. Having knowledge of inventory balances helps a company stave off lost sales collectible to stock-outs as well as carrying too much inventory on hand (which results in additional storage and treatment bes). The get department tolerate make better decisions with the advocate of perpetual inventory records. ?4.

(a)The income meter process is as follows: SalesRevenue| less(prenominal)| Cost ofGoodsSold| Equals| commonProfit| Less| OperatingExpenses| Equals| NetIncome| (b)Income measurement in a merchandise company differs from a return company as follows: (a) sales are the primary fountain of revenue and (b) expenses are dissever 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 trafficker to the buyer; that is, when the exchange transaction...If you confirmatory request to get a full essay, order it on our website: Ordercustompaper.com

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