Ch5+Note+Posting - Chapter 5 Merchandising Operations...

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Chapter 5 – Merchandising Operations Differences between Service and Merchandising Companies Service Company Merchandising Company Statement of Earnings Statement of Earnings 1
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Schedule of Cost of Goods Sold Sales The Effects of Inventory Errors 2 Inventory Error CGS Net Income Assets Equity Understate Ending Inventory Overstate Ending Inventory Understate Beginning Inventory Overstate Beginning Inventory Total (Net) Purchases Gross Purchases Less: Pur. Disc’t Add: Transportation Net Purchases Beginning Inventory = Cost of Goods Sold Ending Inventory Goods Available for Sale Goods Available for Sale Cost of Goods Sold = Gross Profit
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Accounting for Inventory: Perpetual Inventory System Periodic Inventory System Ratios: Gross Profit Margin Profit Margin Inventory Turnover Days’ Sales in Inventory = 365/Inventory Turnover 3
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Purchases Related Journal Entries Perpetual Inventory System Periodic Inventory System Update Inventory constantly: Use Inventory Account to record: 1. Purchases 3. Transportation-in Purchase Discounts Update Inventory not required:
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Ch5+Note+Posting - Chapter 5 Merchandising Operations...

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