7. Big Admiralty Electronics on account at a Discussion Qu ASSIGNMENT MATERIAL 8. 1. 2. The income statement of a merchandising company includes a major type of cost that does not appear in the income statement of a service-type business. Identify this cost and explain what it represents. During the current month, Green Bay Company earned a gross profit of $350,000, whereas New England Company earned a gross profit of only $280,000. Both companies had net sales of $900,000. Does this mean that Green Bay is more profitable than New England? Explain. 10 3. Explain the need for subsidiary ledgers in accounting for merchandising activities. 4. Define the term inventory shrinkage . How is the amount of inventory shrinkage determined in a business using a perpetual inventory system, and how is this shrinkage recorded in the accounting records? 5. Briefly contrast the accounting procedures in perpetual and periodic inventory systems. 6. Evaluate the following statement: Without electronic point-of-sale terminals, it simply would not be possible to use perpetual inventory systems in businesses that sell large quantities of many different products." 7. Explain the distinguishing characteristics of (a) a general journal and (b) a special journal