u04a2 artina mcrae.docx

u04a2 artina mcrae.docx - U04a2 Artina McRae 1 Question 1...

Info icon This preview shows pages 1–2. Sign up to view the full content.

U04a2 Artina McRae 1 Question 1: Proficient: Describe the major differences between income statements for a service company and a merchandise company. For Service Company : total expenses incurred are deducted from revenues earned to establish net earnings or a company’s profitability. For Merchandise Company: This is an income statement that is more complex compared to its counterpart. Merchandising companies must deduct the cost of the goods sold from revenues to arrive at the gross margin. After this is completed, the accountant then deducts other expenses Distinguished: In detail, describe how the gross margin for a merchandising company is determined. - Gross margin is found by taking the difference between net revenue and cost of goods sold. Then that total is divided by revenue and then expressed as a percentage. To arrive at its net revenue the company has to total the gross sales and subtract returns. To obtain the cost of goods sold the accountant adds beginning inventory and the net cost of purchases totals this information and then subtracts the inventory that is left over at the end of the period. Net cost of purchases = purchases – (transportation) + (discounts + returns) Question 2: Proficient: As part of the calculation for the cost of goods sold it is necessary to determine the value of goods on hand termed merchandise inventory.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern