Partial income statements of Company A and Company B are provided below: $$\begin{array}{l}
\begin{array} { | l r r | }
\hline { \text { Company A } } \
\hline & & \
\text { Revenue } && \$ 80,000 \
\text { Expenses: } & \$ 5,000 & \
\text { Utilities Expense } & 15,500 & \
\text { Salaries Expense } & \underline{3,200} & \
\text { Rent Expense } & & \underline{23,700} \
\text { Total Expenses } & &\underline{ \$ 56,300} \
\hline
\end{array}\\
\begin{array} { | l r r | }
\hline { \text { Company B } } & \
\hline & & \
\text { Revenue } && \$ 50,000 \
\text { Cost of Goods Sold: } & & \
\text { Beginning Inventory } & \$ 4,000 & \
\text { Purchases and Freight In } & 23,000 & \
\text { Ending Inventory } &\underline{ - 5,500 }& \
\text { Cost of Goods Sold } & & \underline{21,500} \
\text { Gross Profit } & & \underline{\$ 28,500} \
\hline
\end{array}
\end{array}$$ Which of the following statements is true?
A) Company A is a merchandising company.
B) Company B is a manufacturing company.
C) Company A is a manufacturing company.
D) Company A is a service company.

Question

Partial income statements of Company A and Company B are provided below: $$\begin{array}{l}
\begin{array} { | l r r | } 
\hline  { \text { Company A } } \
\hline & & \
\text { Revenue } && \$ 80,000 \
\text { Expenses: } & \$ 5,000 & \
\text { Utilities Expense } & 15,500 & \
\text { Salaries Expense } & \underline{3,200} & \
\text { Rent Expense } & & \underline{23,700} \
 \text { Total Expenses } & &\underline{ \$ 56,300} \
\hline
\end{array}\\
\begin{array} { | l r r | } 
\hline  { \text { Company B } } & \
\hline & & \
\text { Revenue } && \$ 50,000 \
\text { Cost of Goods Sold: } & & \
\text { Beginning Inventory } & \$ 4,000 & \
\text { Purchases and Freight In } & 23,000 & \
\text { Ending Inventory } &\underline{ - 5,500 }& \
 \text { Cost of Goods Sold } & & \underline{21,500} \
 \text { Gross Profit } & & \underline{\$ 28,500} \
\hline
\end{array}
\end{array}$$ Which of the following statements is true?
A) Company A is a merchandising company.
B) Company B is a manufacturing company.
C) Company A is a manufacturing company.
D) Company A is a service company.

Quizplus · Accepted Answer

Company A only lists general expenses like utilities, salaries, and rent. There is no mention of cost of goods sold or inventory, indicating that it is likely a service company. Company B, on the other hand, has cost of goods sold and mentions inventory, indicating that it is either a merchandising or manufacturing company. However, since it only lists purchases and not any direct labor or manufacturing costs, it is more likely a merchandising company than a manufacturing company.

Partial Income Statements of Company a and Company B Are