Respond to the following questions or problems using grammatically correct language and appropriate APA citations. To achieve a proficient grade in this assignment, answer the proficient-level queries for each question. To achieve a distinguished grade, answer both sets of queries for each question.
- Question 1:
- Describe the major differences between income statements for a service company and a merchandise company.
- In detail, describe how the gross margin for a merchandising company is determined.
- Question 2:
- As part of the calculation for cost of goods sold it is necessary to determine the value of goods on hand, termed merchandise inventory. Accountants use two basic methods for determining the amount of merchandise inventory. Identify the two methods and describe the circumstances (including examples of users of each method) under which each method would be used.
- Describe the computation necessary to arrive at the cost of goods sold figure on a merchandising company's income statement.
- Question 3:
- Contrast an unclassified income statement with the components of a classified income statement.
- Explain why a company would choose to present its income statement data in a classified format. Identify and describe the major sections of a classified income statement
- In each of the following equations supply the missing term(s):
- Net sales = Gross sales - (______________________ + Sales returns and allowances).
- Cost of goods sold = Beginning inventory + Net cost of purchases - ________ ________.
- Gross margin = ________ ________ - Cost of goods sold.
- Income from operations = __________ _________ - Operating expenses.
- Net income = Income from operations + _________ ________ - ________ ________.
- Question 4:
- What is gross margin? How is it calculated?
- Why might management be interested in the use of the tool for analyzing accounting information?
- Using a bit of research, which industry presents a notoriously low gross margin percentage, and conversely, name an industry that traditionally experiences a high gross margin percentage.
Suggestions: The u04a2 assignment will familiarize you with an introduction to inventories and the classified income statement. Here are some hints and suggestions for certain questions in this assignment:
u04a2 Question 1: In the Distinguished-level question, you are asked to describe how the gross margin for a merchandising company is determined. To respond to this, you may simply provide the formula to compute gross margin and provide the formula to compute cost of goods sold.
u04a2 Question 2: This question is asking for information concerning determining the quantity of inventory on hand: Accordingly, respond to this question identifying and describing the Perpetual and Periodic inventory procedures.
u04a2 Question 3: In the Distinguished-level question, you are asked to supply the missing term(s). Here is the correct response to the first of the five items. Feel free to use this response and then respond to the remaining items in a similar format:
Net Sales = Gross Sales - ([Sales Discounts] + Sales Returns and Allowances)
u04a2 Question 4: In the Proficient-level question, it is acceptable to use section 7.10 Key Terms ... for discussing Gross Margin.
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