Book 2 - Chapter 18

Multiple Choice


1.	d
2.	b
3.	a
4.	d
5.	a There is no merchandise inventory to buy, and the customers pay in cash.
6.	c A hardware store has inventory that it must sell.
7.	b
8.	d
9.	c
10.	d

Reinforcement Problems

LG 18-1.

Business	Net Sales	Cost of Goods Sold	Gross Profit	Operating Expenses	Net Income (Loss)
Belleville Company	$52,000	$29,000	(a) $23,000	$12,000	(b) $11,000
Blackhawk Corp.	(c) $197,000	$125,000	$72,000	$22,000	(d) $50,000
Danville Enterprises	$210,000	(e) $150,000	(f) $60,000	$45,000	$15,000
Elgin Partnership	(g) $168,000	$84,000	(h) $84,000	$99,000	($15,000)
Sandberg Company	$35,000	(i) $14,000	$21,000	(j) $16,000	$5,000
Truman Company	(k) $390,000	$210,000	$180,000	(l) $192,000	($12,000)
Wright Corp.	$97,000	$56,000	(m) $41,000	(n) $19,000	$22,000


LG 18-2.

a.	Periodic is most appropriate. It is the least expensive, and inventory control is less important with low-cost items.

b.	Perpetual is most important. It provides the greatest control over inventory because someone is required not only to keep a record of purchases, but also to keep a record of all decreases in inventory.

c.	You need more timely cost of goods sold and inventory information. The perpetual method is most appropriate.

d.	The periodic method will be sufficient in this case.

Learning Goal 18

SOLUTIONS

Learning Goal 8: Distinguish Service Operations From Merchandising Operation

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