The Income Statements and Balance Sheets of Service, Retailing, and Manufacturing

question 11

Essay

The income statements and balance sheets of service, retailing, and manufacturing businesses tend to differ.
Required:
A. Which of these businesses will disclose a cost-of-goods-sold figure on the income statement? Why?
B. Briefly describe the difference between a retailing firm and manufacturer's disclosure of inventories on the balance sheet.
A. Retailers and manufacturers will disclose a cost-of-goods-sold figure because both of these entities sell goods. Service businesses, in contrast, do not given that such firms provide services.
A. Which of these businesses will disclose a cost-of-goods-sold figure on the income statement? Why?
B. A retailer will typically disclose inventories as one-line item entitled merchandise inventories. Manufacturers, on the other hand, carry three different types of inventories: raw materials, work in process, and finished goods.
B. Briefly describe the difference between a retailing firm and manufacturer's disclosure of inventories on the balance sheet.

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Definitions:

Dependent Variable

The variable in an experiment that is observed and expected to change as a result of manipulations in the independent variable.

Independent Variable

In scientific research, the variable that is manipulated or changed by the researcher to observe its effects on the dependent variable.

Correlation Coefficient

A numerical index of the degree of relationship that exists between two variables.

Strength

The quality or state of being physically strong, as well as a person's mental or emotional ability to deal with difficult situations.