Question

Mr. Etemadi has prepared the following list of statements about service companies and merchandisers. Identify each statement as true or false.

1. Measuring net income for a merchandiser is conceptually the same as for a service company.
2. For a merchandiser, sales less operating expenses is called gross profit.
3. For a merchandiser, the primary source of revenues is the sale of inventory.
4. Sales salaries and wages is an example of an operating expense.
5. The operating cycle of a merchandiser is the same as that of a service company.

Answer 1

Step-by-step explanation:

1. Measuring net income for a merchandiser is conceptually the same as for a service company. TRUE

2. For a merchandiser, sales less operating expenses is called gross profit.

FALSE

For a merchandiser,sales subtracted from cost of goods sold is called gross profit.

3. For a merchandiser, the primary source of revenues is the sale of inventory.

TRUE

4. Sales salaries and wages is an example of an operating expense. TRUE

5. The operating cycle of a merchandiser is the same as that of a service company.

FALSE

A perpetual inventory system continuously leeps detailed records of the cost of the each purchase and sale. It shows the inventory that should be on hand for energy item.