How-do-components-of-revenues-and-expenses-differ-between-a-merchandising-company-and-a-service-company

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we are shifting gears and begin analyzing the characteristics of a merchandising operation and introduce inventory.

1. How do components of revenues and expenses differ between a merchandising company and a service company

2. In your own words, define materiality. Provide an example to support your conclusion.

3. Nida Hat Shop received a shipment of hats for which it paid the wholesaler $2,940. The price of the hats was $3,000, but Nida was given a $60 cash discount and required to pay freight charges of $75. What amount should Nida include in inventory? Why?

4. Marshall Company discovers in 2014 that its ending inventory at December 31, 2013 was $5,000 understated. What effect will this error have on (a) 2013 net income, (b) 2014 net income, and (c) the combined net income for the 2 years?

 
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