E5-1 Mr. Wellington has prepared the following list of statements about service companies

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Mr. Wellington has prepared the following list of statements about service companies
and merchandisers.
1. Measuring net income for a merchandising company is conceptually the same as for a service
company.
2. For a merchandising company, sales less operating expenses is called gross profit.
3. For a merchandising company, the primary source of revenues is the sale of inventory.
4. Sales salaries is an example of an operating expense.
5. The operating cycle of a merchandising company is the same as that of a service company.
6. In a perpetual inventory system, no detailed inventory records of goods on hand are
maintained.
7. In a periodic inventory system, the cost of goods sold is determined only at the end of the
accounting period.
8. A periodic inventory system provides better control over inventories than a perpetual
system.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.