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Horngren'S Financial And Managerial Accounting
Found in: Page 890

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Short Answer

Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash $ 6 Wages Expense $ 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Identifying differences between service, merchandising, and manufacturing companies

Using the above data, determine the company type. Identify each company as a service company, merchandising company, or manufacturing company

Company A is a manufacturing company, company B is a service company and company C is a merchandising company.

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Step by Step Solution

Step-by-Step SolutionStep 1: Company A

Company A is a manufacturing company, as the particulars given for company A include the work-in-process inventory, cost of goods manufactured, finished goods inventory, cost of goods sold, and the raw materials inventory.

Step 2: Company B

Company B is a service company as its’ particulars include service revenue, service companies provide the services to the clients.

Step 3: Company C

Company C is a merchandising company as its particulars include the merchandise inventory, this is the only type of inventory held by the merchandising company.

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