E5-1 Mr. Wellington has prepared the following list of statements about service companies Answer general questions on
Question:
E5-1 Mr. Wellington has prepared the following list of statements about service companies Answer general questions on and merchandisers. inventory.
1. Measuring net income for a merchandising company is conceptually the same as for a servĀ¬
ice company.
2. For a merchandising company, sales less operating expenses is called gross profit.
3. For a merchandising company, the primary source of revenues is the sale of inventory.
4. Sales salaries is an example of an operating expense.
5. The operating cycle of a merchandising company 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.
Instructions Identify each statement as true or false. If false, indicate how to correct the statement.
Step by Step Answer:
Financial Accounting
ISBN: 9780470128848
6th Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso