Chapter 5, Problem 1QC

Which account does a merchandiser use that a service company does not use?

1. a. Cost of Goods Sold
2. b. Merchandise Inventory
3. c. Sales Revenue
4. d. All of the above

To determine

Merchandise Business: Merchandise business refers to the business of buying goods from the suppliers, and selling those to the customers with profit.

To Find: The correct account that is used in a merchandise company.

Answer to Problem 1QC

(d) All the above

Explanation of Solution

Explanation for correct answer:

Merchandise Company uses cost of goods sold account, sales revenue account, and merchandise inventory account to calculate its gross profit. However, Service Company uses service revenue account and operating expenses account to calculate its gross profit.

Explanation for incorrect answers:

• Option (a) is incorrect because only cost of goods sold account is not use in a merchandise company.
• Option (b) is incorrect because only merchandise inventory account is not use in a merchandise company.
• Option (c) is incorrect because only sales revenue account is not use in a merchandise company.

Conclusion

Therefore, the correct option is (d).