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(1) \"The steps in the accounting cycle for a merchandising company differ from the steps in the accounting cycle for a service company.\" Do you agree or disagree? (2) (a) sales are the primary source of revenue and (b) expenses are divided into two main categories: cost of goods sold and operating expenses. (2) How do the components of revenues and expenses differ between (3) Dillard Co. has sales revenue of $100,000, cost of goods sold of $70,000, and operating expenses of $18,000. What is its gross profit? Gross profit $ (4) Answer the following questions. What is the primary source document for recording (1) cash sales and (2) credit sales? Primary source document Cash sales Credit sales Using XXs for amounts, give the journal entry for each of the transactions, assuming perpetual inventory. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) The entries are: Transaction Account Titles and Explanation Debit Credit (5) Goods costing $1,900 are purchased on account on July 15 with credit terms of 2/10, n/30. On July 18, the purchaser receives a $300 credit from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period. The company uses a perpetual inventory system. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 24 (6) Why is the normal operating cycle for a merchandising company likely to be longer than for a service company? (7) Determine whether the following accounts are added to or deducted from purchases to determine the cost of goods purchased under a periodic system. For each account, indicate whether it is added or deducted, and its normal balance. Accounts Added/Deducted Normal Balance Purchase Returns and Allowances Purchase Discounts Freight-In (8) George Mallein is considering investing in Wigginton Pet Food Company. Wigginton's net income increased considerably during the most recent year even though many other companies in the same industry reported disappointing earnings. George wants to know whether the company's earnings provide a reasonable depiction of its results. What initial step can George take to help determine whether he needs to investigate further? (9) On July 15, a company purchases on account goods costing $1,900, with credit terms of 2/10, n/30. On July 18, the company receives a $400 credit memo from the supplier for damaged goods. Give the journal entry on July 24 to record payment of the balance due within the discount period assuming a periodic inventory system. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit July 24 (10) By how much did Tootsie Roll's total gross profit change, and in what direction, in 2011? (Enter the amounts in thousands.) $163,144 Address: http://scientistatwork.blogs.nytimes.com/2012/02/07/better-lives-inbettercoffee/?hp Steps 1. Type in company name. 2. Choose Quote, then choose Profile, then choose Income Statement. 3. Choose Industry to identify others in this industry. Total gross profit by $ (11) \"The key to successful business operations is effective inventory management.\" Do you agree? (12) An item must possess two characteristics to be classified as inventory. What are these two characteristics? (13) What is just-in-time inventory management? What are its potential advantages? (14) Your friend Jill Wurtz has been hired to help take the physical inventory in Proehl's Hardware Store. Explain to Jill what this job will entail. (15) Millar Company ships merchandise to Branyan Corporation on December 30. The merchandise reaches the buyer on January 5. Indicate the terms of sale that will result in the goods being included in (1) Millar's December 31 inventory. (2) Branyan's December 31 inventory. (3) Under what circumstances should Millar Company include consigned goods in its inventory? (16) Nida Hat Shop received a shipment of hats for which it paid the wholesaler $2,940. The price of the hats was $3,000, but Nida was given a $60 cash discount and required to pay freight charges of $75. What amount should Nida include in inventory? Inventoriable costs $ (17) What is the major advantage and major disadvantage of the specific identification method of inventory costing? (18) In a period of rising prices, the inventory reported in Long Company's balance sheet is close to the current cost of the inventory, whereas Windsor Company's inventory is considerably below its current cost. Identify the inventory cost flow method used by each company. Inventory cost flow method Long Company Windsor Company Which company probably has been reporting the higher gross profit? will have the higher gross profit. (19) Espinosa Corporation has been using the FIFO cost flow method during a prolonged period of inflation. During the same time period, Espinosa has been paying out all of its net income as dividends. What adverse effects may result from this policy? (20) Discuss the impact the use of LIFO has on taxes paid, cash flows, and the quality of earnings ratio relative to the impact of FIFO when prices are increasing. (21) Mrs. Betancourt is uncertain about how the historical cost principle applies to plant assets. Explain the principle to Mrs. Betancourt. (22) Carington Company acquires the land and building owned by Ankiel Company. What types of costs may be incurred to make the asset ready for its intended use if Carington Company wants to use only the land? If it wants to use both the land and the building? (24) Adriana is studying for the next accounting examination. She asks your help on two questions: Answer Adriana's questions What is salvage value? How is salvage value used in determining depreciable cost under the straight-line method? (25) Contrast the straight-line method and the units-of-activity method in relation to. Useful life The pattern of periodic depreciation over useful life. (26) Distinguish between ordinary repairs and capital expenditures during an asset's useful life. (27) What are the similarities and differences between depreciation and amortization? (28) Berwik Company hires an accounting intern who says that intangible assets should always be amortized over their legal lives. Is the intern correct? The intern is (29) Megan Keen, a business major, is working on a case problem for one of her classes. In this case problem, the company needs to raise cash to market a new product it developed. Jeff Denton, an engineering major, takes one look at the company's balance sheet and says, \"This company has an awful lot of goodwill. Why don't you recommend that they sell some of it to raise cash?\" How should Megan respond to Jeff? (30) Often research and development costs provide companies with benefits that last a number of years. (For example, these costs can lead to the development of a patent that will increase the company's income for many years.) However, generally accepted accounting principles require that such costs be recorded as an expense when incurred. Why? (31) Garcia Corporation uses straight-line depreciation for financial reporting purposes but an accelerated method for tax purposes. Is it acceptable to use different methods for the two purposes