Part II

You may recall from Principles I that Cost of goods sold for a retailer is figured as shown below:

Beginning inventory + Purchases = Cost of goods available for sale Ending inventory = Cost of goods sold

(1) How does the Cost of Goods Sold section of the income statement differ between merchandising and manufacturing companies and how is it calculated for manufacturing companies?

(2) Inventory on the balance sheet is also different for a manufacturing company than for a retailer. What are the three types of inventory on a manufacturers balance sheet? After naming all three, select one and discuss it.