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Summary of Study Objectives Chapter 5

Summary of Study Objectives Chapter 5 - shows numerous...

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Summary of Study Objectives Chapter 5 1 Identify the differences between a service company and a Because of the presence of inventory, a merchandising compa goods sold, and gross profit. To account for inventory, a merc choose between a perpetual inventory system and a periodic i 2 Explain the recording of purchases under a perpetual inve Merchandise Inventory account is debited for all purchases of costs, and it is credited for purchase discounts and purchase re 3 Explain the recording of sales revenues under a perpetual inventory is sold, Accounts Receivable (or Cash) is debited an selling price of the merchandise. At the same time, Cost of Go Merchandise Inventory is credited for the cost of inventory ite are required for (a) sales returns and allowances and (b) sales 4 Distinguish between a single-step and a multiple-step inco step income statement, companies classify all data under two expenses, and net income is determined in one step. A multipl
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Unformatted text preview: shows numerous steps in determining net income, including r activities. 5 Determine cost of goods sold under a periodic system. accounts to keep track of transactions that affect inventory. To sold, first calculate cost of goods purchased by adjusting purc discounts, and freight-in. Then calculate cost of goods sold by purchased to beginning inventory and subtracting ending inve 6 Explain the factors affecting profitability. Profitability is af measured by the gross profit rate, and by management's abilit measured by the profit margin ratio. 7 Identify a quality of earnings indicator. Earnings have high and transparent depiction of how a company performed. An in earnings is the quality of earnings ratio, which is net cash pro divided by net income. Measures above 1 suggest the compan accounting practices. Measures significantly below 1 might su aggressive accounting to accelerate the recognition of income...
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