OVERVIEW OF BRIEF EXERCISES, EXERCISES, …

1 BriefExercisesB. Ex. Ex. Ex. Ex. Ex. Ex. Ex. Ex. Ex. Ex. Ex. , , 5, , performance6, , inventory system4, 5 CHAPTER 6 MERCHANDISING ACTIVITIESA nalysis, communicationAnalysis, communicationSkillsYou as a studentAnalysisLearningTopicTaking a physical inventoryPeriodic inventory systemsExercisesUnderstanding inventory cost flowsComparison of inventory systemsRelationships within periodic inventory systemsSelecting an inventory systemPerpetual inventory systemsObjectivesLearningTopicObjectives 68 Computation of gross profitSpecial journals7 SkillsAnalysis, communicationEffects of basic merchandising transactionsAnalysis.

2 Communication, Periodic inventory system - closing process2, 4 AnalysisPeriodic inventory system - working backwards through the COGS sectionAnalysis7 Analysis2, 4, 8 Analysis2, 82, 4, 8 AnalysisAnalysisSales returns and allowances6 AnalysisBenefit of taking a purchase discountAnalysisCommunication, judgmentEthics, fraud, and corporate governanceOVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASESA ccounts receivable subsidiary ledgerPerpetual inventory system - computation of incomePeriodic inventory system - determine cost of goods sold2, 3, 8 Periodic inventory system - inventory balance during year2, 4, 8 Analysis, communication, Analysis, communicationAnalysis, communication, AnalysisCommunication, judgmentAnalysis, communication, AnalysisAnalysis, communication The McGraw-Hill Companies, Inc.

3 , 2012 OVERVIEW an annual report8 ProblemsSets A, A,B1, 3, A,B1-3, 6, 8and A, A,B3, A,B3, A,B2, 3, A,B1, 3, A,B1 , 5, & corporate governance) 8annual report (Internet)technologyAnalysis, communicationAnalysis, communicationMerchandising transactionsCorrecting Errors - Recording of Merchandising TransactionsCommunication, judgmentSelecting an inventory systemCommunication, judgmentAnalysis, communication, Accrual accounting , Cash Flow, and Fair ValueEvaluating inventory systemsA cost-benefit analysisAnalysis, communication, Analysis, communication, judgmentA comprehensive problemManipulating income (Ethics, fraudCommunication, judgmentCritical Thinking CasesReal World.

4 GAP Exploring anCommunication, research, Analysis, communicationAnalysis, communication, Trend analysisAnalysis, communicationIncome statement preparationNet cost and gross price methodsAnalysis, communicationLearningAnalysis, communicationSkillsAnalysis, communication, SkillsDifference between income and cash flowsExercisesTopicObjectivesTopicLearni ngEvaluating profitabilityObjectives The McGraw-Hill Companies, Inc., 2012 OVERVIEW (p. 2)DESCRIPTIONS OF PROBLEMS ANDCRITICAL THINKING CASESP roblems (Sets A and B)35 A,B15 A,B20 Medium A, A,B30 Strong A,B45 Strong Students prepare an income statement for a small retail store using information from an adjusted trial balance.

5 Using this income statement, they are asked to compute the company s gross profit margin, evaluate customer satisfaction, interpret the meaning of several accounts, and identify the accounts in the store s operating performance evaluation of a merchandising company using changes in net sales, sales per square foot of selling space, and comparable store Enterprises/Queen Enterprises30 MediumA comprehensive problem on merchandising transactions. Also asks students to evaluate whether it is worthwhile to take advantage of a 1/10, n/30 cash straightforward comparison of the net cost and gross invoice price methods of recording purchases of problem that requires students to evaluate the effects of accounting errors on various balance sheet and income statement accounts and to prepare journal entries to correct the errors.

6 The problem requires the errors to be corrected both assuming that the books remain open and assuming that the books have already been are BRIEF descriptions of each problem and case. These descriptions are accompanied by the estimated time (in minutes) required for completion and by a difficulty rating. The time estimates assume use of the partially filled-in working A,BClaypool Hardware/Big Oak LumberHendry's Boutique/Harry's HaberdasheryKnauss Supermarkets/Jill's Department StoreIntroduction to both perpetual inventory systems and financial statement analysis. After making journal entries for merchandising transactions, students are asked to compare the company s gross profit rate with the industry average and draw conclusions.

7 Siogo Shoes and Sole Mates/Hip Pants and SleekLamprino Appliance/Mary's TV The McGraw-Hill Companies, Inc., 2012 OVERVIEW Desc. Problems (continued) A,B30 Strong A,B40 Strong Genuine Accessories/Computer ResourcesCPI/SUI A comprehensive problem addressing every learning objective in the chapter. Closely parallels the Demonstration problem that requires students to calculate gross profit under an accrual-based system and under a cash-based system, and to explain the difference between the two computations. Also, students are introduced to fair value accounting , and are required to prepare a journal entry to revalue inventory (for loan evaluation purposes) to fair value.

8 The McGraw-Hill Companies, Inc., 2012 OVERVIEW Desc. ( )Critical Thinking CasesSelecting an Inventory System A Cost-Benefit Analysis Group Assignment - Evaluating an Inventory System Manipulating Income20 MediumEthics, Fraud & Corporate GovernanceExploring the Annual Report of GAP, Inc. Internet Students must react to a supervisor's request to alter financial records in order to improve the appearance of the company's financial EasyVisit the home page of Gap, Inc., and gather financial information to evaluate sales Medium35 time estimateStudents are to visit two local businesses to gain an understanding of the inventory systems in use.

9 They are then asked to evaluate those systems in terms of the information needs and resources of the are asked the type of inventory system they would expect to find in various types of business operations. Leads to an open-ended discussion of why different types of businesses maintain different types of inventory systems. A very practical the company s markup policy, students are asked to determine the amount of shrinkage loss included in the cost of goods sold in a business using a periodic inventory system. Having determined the amount of loss, they then are asked to evaluate the economic benefit of hiring a security guard.

10 The McGraw-Hill Companies, Inc., 2012 Desc. of Prob & CasesSUGGESTED ANSWERS TO DISCUSSION ledger accounts show the total amounts of various assets, liabilities, revenue, and expenses. While these total amounts are used in financial statements, company personnel need more detailed information about the items comprising these totals. This detail is provided in subsidiary ledgers. Subsidiary ledgers are needed to show the amounts receivable from individual customers, the amounts owed to individual creditors, and the quantities and costs of the specific products in cost of goods sold appears in the income statement of any business that sells merchandise, but not in the income statement of a business that sells only services.