Conceptual

Describe merchandising activities and identify income components for a merchandising company. Identify and explain the inventory asset of a merchandising company. Describe both perpetual and periodic inventory systems. Analyze and interpret cost flows and operating activities of a merchandising company.

Analytical

Compute the acid-test ratio and explain its use to assess liquidity. Compute the gross margin ratio and explain its use to assess profitability.

Procedural

Analyze and record transactions for merchandise purchases using a perpetual system. Analyze and record transactions for merchandise sales using a perpetual system. Prepare adjustments and close accounts for a merchandising company. Define and prepare multiple-step and single-step income statements. Appendix 4A—Record and compare merchandising transactions using both periodic and perpetual inventory systems.