1. Identify the differences between a service enterprise and a merchandising company. Identify the contra accounts that have normal debit balances and explain why they are not considered expenses. What are the journal entries a merchandising organization would use to record the purchase and subsequent sale of merchandise? How would these transactions differ with a periodic versus a perpetual inventory system? Identify the Income Statement Presentation that is recommended for merchandising organizations? Describe the five amounts not shown on a service company's income statement. Identify and briefly explain the five unique amounts.
2. The periodic and the perpetual inventory systems are two methods that companies use to account for inventories. Briefly describe the major features of each system and explain why a physical inventory is necessary under both systems. In your opinion, why are perpetual inventory systems so much more popular today than in the early 1960's and earlier? Why would a company employing a perpetual inventory system still take a physical inventory periodically?
3. IFRS6-1: Briefly describe some of the similarities and differences between GAAP and IFRS with respect to the accounting for inventories.