Question

E5.1 (LO 1) Mr. McKenzie has prepared the following list of statements about service companies and merchandisers. 1. Measuring net income for a merchandiser is conceptually the same as for a service company. 2. For a merchandiser, sales less operating expenses is called gross profit. 3. For a merchandiser, the primary source of revenues is the sale of inventory. 4. Sales salaries and wages is an example of an operating expense. 5. The operating cycle of a merchandiser is the same as that of a service company. 6. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained. 7. In a periodic inventory system, the cost of goods sold is determined only at the end of the accounting period. 8. A periodic inventory system provides better control over inventories than a perpetual system.

Answer 1

1 co Answer:- - Summarized the information given in questions (1) Measuring net income for a merchandiser is conceptually the same as for a secusce company : TRUE. (3) for a merchandiser, sales less operceting expenses is called gross profit: false Estreet statement Sales devenue - Cost of goods sold Gooss profit (3) for a merchandiseo, the poimary source of revenues is the sale of inventory :TRUE (4) Sales salaries and wages is an example of an an operating expenses : TRUE (5) The operating cycle of a merchandiser is the same as that of a service company FALSE correct statement. The added asset account merchandising company is the inventory account 6 In a perpetual inventory system, no detailed inventory that should be hand too everry item. for a

(7) In a periodic inventory system, the cost of goods sold is determined only at the end of the accounting peorado TRUE (s) A periodic inventory system provides better control over inventories than a perpetual System: FALSE can cootect statement: peopetual system shows the quantities that should be on hand, check whether the amount of goods with the inventory records. If shortages are uncovered, the company can investigati immediately . *
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