Comparing Merchandising Activities with Manufacturing ActivitiesMerchandising CompanyPurchase inventory in ready-to-sell condition.Manufacturing CompanyManufacture inventory and have a longer and more complex operating cycle.
Income Statement of a Merchandising CompanyComputer CityCondensed Income StatementFor the Year Ended December 31, 2010Revenue from sales900,000$ Less: Cost of goods sold540,000Gross profit360,000$ Less: Expenses270,000Net income90,000$ Cost of goods soldrepresents the expense of goods that are sold to customers.Gross profitis a useful means of measuring the profitability of sales transactions.
Subscribe to view the full document.
Operating Cycle of a Merchandising Company2. Sale of merchandise on accountCashInventoryAccounts ReceivableThe series of transactions through which a business generates its revenue and its cash receipts from customers is called the OPERATING CYCLE.