Chapter 18, Problem E18.18E

To determine

Concept Introduction:

Types of Companies:

There are different types of business depending up on their operations. The different types of operations can be – selling merchandise, manufacturing the goods, providing services like professional services etc. Some of them can explained as under –

Business of Providing Services or a service company:

The main operations of Service Company are to provide services to the people so the business is more services oriented rather than merchandise oriented.

Merchandising Company:

A merchandising company is the own which trades in the purchase and sale of the merchandise inventory.

Manufacturing Company:

A manufacturing company is the own which first manufactures the goods in house, then sell it outside.

Depending upon the type of businesses, the expenses of the businesses also differ.

Operating Income:

Operating Income can be defined as the income generated from the operations. The cost of goods sold is subtracted from sales revenue to find gross profit. From gross profit, other operating expense are deducted to calculate operating income.

Current Assets:

Current Assets can be defined as the assets which can be converted into cash with a short-period like accounts receivables, inventories, cash, etc.

Requirement 1

To identify

Each company as a service company, Merchandise Company, or manufacturing company

To determine

Requirement 2

To calculate:

Operating Income for –

Company A

Company B

Company C

To determine

Requirement 3

To Calculate:

Total current assets for –

Company A

Company B

Company C