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Questions for further Thought Arielly answer the following questions. A road building company might have several inven- sand, stone, asphalt, and gasoline. Explain the dif- Fories on hand. These could include office supplies, ference between these inventories and merchan- dise inventory 12. Assume that a large department store wants to take a quick inventory with some sacrifice of accuracy, to give it a rough idea of its progress. Try to devise a method of shortening the inventory procedure to give a reasonably close result. 13. The method of handling the merchandise inventory on the work sheet may be thought of as a "manipu- lation" rather than as an "adjustment." Explain. 14. Which financial statement do you think is of the most interest to a banker? Explain your answer. 15. What do you think is the most common error made by students when doing the closing entries for a merchandising business? 16. Explain how the credit note got its name. 17. In purchase transactions where there are returns and allowances involved, it is normal to wait until all of the source documents are received before making payment. Why would this be done? 18. Some businesses refuse to give a refund for mer- chandise returned. Explain how they handle this type of transaction 2. The text indicates that merchandise that is lost, broken, or stolen is lumped in with the cost of goods sold. Explain the logic of this. 3. Merchandise inventory on hand at the end of the fiscal period is listed on the balance sheet at its cost price. Indirectly, some inventory is listed on the income statement at its selling price. Explain. 4. Give a logical reason for showing the gross profit separately on the income statement. 5. Having a computer inventory system allows a business to carry a smaller total inventory. Explain why this is possible. What is the advan- tage of being able to carry a smaller inventory? 6. The text states that the selling prices of goods, but not the cost prices, are marked on the merchandise. Why are the cost prices not marked on the goods? 1. The merchandise sold is listed in two places on the income statement. Explain why this is done. & Explain why the closing inventory is valued at its cost price. 9. Explain why freight-in is included in the cost of goods sold calculation 10. Give a logical reason why a business would close down for a day or two in order to take inventory. 11. Many business people who use the periodic inven- tory system would rather not bother with taking inventory. However, they do it anyway. Explain why. Cases for Further Thought Briefly answer the following question. 1. Paula Waukey is the owner of a paper products business. Her company makes available a large variety of papers and paper-related products, such as disposable towels, coffee filters, table covers, disposable coffee cups, and so on. Paula's customers could buy more cheaply by dealing directly with the manufacturers of the products. However, they continue to do business with Paula. Explain why Paula's customers choose to do business with her