Operating cycle: Operating cycle is the chain of business activities performed in an organization. An organization can be manufacturing, servicing of merchandising type. For a merchandiser, the main business activities are the purchase, payment to the supplier, sales, and receipts from the customer. Hence the operating cycle of a merchandiser is limited as compared with the operating cycle of a manufacturer. The Operating cycle mainly includes following activities: -Purchases from the supplier (either cash or on account) -Payment to suppliers -Inventory -Sales (either cash or on account) -Collection from customer The formula to calculate the operating cycle is as follows: Net Operating Cycle = Inventory Period + Accounts Receivable Period − Accounts Payable Period To Indicate: The effect of the operating cycle on the difference in the prices of given stores.

Question

Want to see the full answer?

Answer 1

Question

Chapter 4, Problem 63.1C

To determine

Concept Introduction:

Operating cycle:

Operating cycle is the chain of business activities performed in an organization. An organization can be manufacturing, servicing of merchandising type. For a merchandiser, the main business activities are the purchase, payment to the supplier, sales, and receipts from the customer. Hence the operating cycle of a merchandiser is limited as compared with the operating cycle of a manufacturer.

The Operating cycle mainly includes following activities:

-Purchases from the supplier (either cash or on account)

-Payment to suppliers

-Inventory

-Sales (either cash or on account)

-Collection from customer

The formula to calculate the operating cycle is as follows:

Net Operating Cycle = Inventory Period + Accounts Receivable Period − Accounts Payable Period

To Indicate:

The effect of the operating cycle on the difference in the prices of given stores.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

9 Sellers often offer some discounts to customers to adjust the sales prices of items listed in the catalogue. Such kind of discount is known as _________________. a. Net realizable value (NRV) b. Sales allowance c. Trade discount d. Sales discount

LO 6.1 What do credit terms of 4/10, n/30 mean in regard to a purchase? 3LO 6.1 What is the difference between a sales return and a sales allowance? 4LO 6.1 If a retailer made a purchase in the amount of $350 with credit terms of 2/15, n/60. What would the retailer pay in cash if they received the discount? 5LO 6.2 What are two advantages and disadvantages of the perpetual inventory system? 6.LO 6.2 What are two advantages and disadvantages of the periodic inventory system?

Question 13 A customer returns $690 worth of merchandise and receives a full refund. What accounts recognize this sales return, assuming the customer has not yet remitted payment to the retailer? O accounts receivable, sales returns and allowances O accounts receivable, cash O sales returns and allowances, purchases O sales discounts, cost of goods sold