Test 2

Periodic System

Companies do not keep detailed inventory records, they determine cost of goods sold only at the end of the accounting period.

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

False

Gross Profit=

Net Sales-Cost of Goods Sold

Net Income=

Revenues - Expenses

Beginning inventory plus the cost of goods purchased= cost of goods available for sale

True

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

True

Perpetual System

companies keep detailed records of the cost of each inventory purchase and sale. Companies determine cost of goods sold each time a sale occurs

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

false

in a perpetual inventory system, no detailed inventory records of goods on hand are maintained

false

income from operations=

gross profit - operating expenses

for a merchandiser, the primary source of revenues is the sale of inventory

true

sales salaries and wages is an example of an operating expense

true