Merchandising Operations E5-1 Mr. McKenzie has prepared the following list of st
ID: 2343214 • Letter: M
Question
Merchandising Operations E5-1 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 compa 6. In a perpetual inventory system, no detailed inventory records of goods on hand are maintained. the accounting period. system. 7. In a periodic inventory system, the cost of goods sold is determined only at the end of 8. A periodic inventory system provides better control over inventories than a perpetual Instructions Identify each statement as true or false. If false, indicate how to correct the statement.Explanation / Answer
Measuring net income for a merchandiser is conceptually the same as for a service company : TRUE For a merchandiser, sales less operating expenses is called gross profit : FALSE CORRECT STATEMENT : Sales Revenue - Cost of goods sold = Gross Profit. For a merchandiser, the primary source of revenues is the sale of inventory : TRUE Sales salaries and wages is an example of an operating expenses : TRUE The operating cycle of a merchandiser is the same as that of a service company : FALSE . CORRECT STATEMENT : The added asset account for a merchandising company is the inventory account In a perpetual Inventory System, no detailed Inventory records of goods on hand are maintained : FALSE. CORRECT STATEMENT : Perpetual Inventory system keeps continuously detailed records of the inventory that should be on hand for every item. In a periodic Inventory System, the cost of goods sold is determined only at the end of the accounting period : TRUE. A periodic inventory system provides better control over inventories than a perpetual System : FALSE. CORRECT STATEMENT : Perpetual system shows the quantities that should be on hand, can check whether the amount of goods agrees with the inventory records. If shortages are uncovered, the company can investigate Immediately.