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The correct option of this multiple choice question (mcq) is (c), as a moving company deals in services and provides services to clients against the fees received from clients during the accounting period. Examples of moving companies include consulting firm, law firms, rental companies, etc. In service company’s business, inventory valuation is not required as the service business is not dealt with inventory or goods held for sale purposes during the working hours of the business. So, in merchandising or trading business, finished goods inventory (both beginning and ending) are considered. How Is The Income Statement Of A Merchandising Company Different From That Of A Service Company? As the Merchandising Company (MC) deals with buying and selling of goods, so cost of goods sold is calculated which is calculated as shown below: Cost of Goods Sold (COGS) = Beginning Inventory + Purchases - Ending Inventory In MC, the Income Statement includes the following items as shown below: (i...

The correct option of this multiple choice (mcq) is a, as under retail method of inventory, we multiply the ending inventory at retail price by the cost-to-retail ratio in order to calculate the estimated cost of Ending Inventory (EI) without going into inventory details for physical counting. This method is suitable for businesses which have large volume of inventory. The formula used for the calculation of ending inventory at cost under Retail Inventory Method (RIM) is divided into two parts which are shown below: Ending Inventory At Retail = Retail Value of Goods Available For Sale - Net Sales Now, multiply EI at retail price by cost-to-retail ratio as shown below: Ending Inventory At Cost = Ending Inventory At Retail X Cost-To-Retail Ratio Examples: We have the following data to calculate EI at cost Beginning Inventory (BI) = $5,000 Purchases at cost = $15,000 BI at Retail = $10,000 Purchases at retail = $30,000 Net Sales = $35,000 Here Cost price of goods available for sale =...