Question

Question: Current assets for two different companies at fiscal year-end 2017 are listed here. One is a manufacturer, Rayzer Skis Mfg., and the other, Sunrise Foods, is a grocery distribution company.

1. Identify which set of numbers relates to the manufacturer and which to the merchandiser.

2. Prepare the current asset section for each company from this information. Discuss why the current asset section for these two companies is different.

Account	Company 1	Company 2
Cash	\(7,000	\)5,000
Raw material inventory		42,000
Merchandise inventory	45,000	-
Work-in-process inventory	-	30,000
Finished goods inventory	-	50,000
Accounts receivable net	62,000	75,000
Prepaid expenses	1,500	900

Short answer

Answer

1. Classification of companies:

Company 1:Sunrise Foods

Company 2:Rayzer skis Mfg

1. Current assets:

Sunrise Foods:$115,500.

Rayzer skis Mfg:$202,900.

Step-by-step solution

Definition of Current Assets

The resources the business entity handles for maintaining liquidity as they generate cash inflow within the operation period are known as current assets. It includes assets such as inventory and receivables

Classification of companies as manufacturers and merchandisers

Company 1 is a merchandiser because it does not report work-in-process and finished goods inventory. It only reports merchandise inventory that reflects the goods ready for sale acquired vendor.

Company 2: It is a manufacturer because it reports the raw material, work-in-process, and finished goods inventory, and all of these are reported by a manufacturing firm only because the merchandiser does not purchase raw material and work-in-process; it purchases ready-for-sale goods.

Current asset section

Sunrise Foods
Particular	Amount $
Current assets:
Cash	$7,000
Merchandise inventory	45,000
Accounts receivable	62,000
Prepaid expenses	1,500
Total current assets	$115,500

Rayzer skis Mfg
Particular	Amount $	Amount $
Current assets:
Cash		$5,000
Merchandise inventory:
Raw material	$42,000
Work-in-process	30,000
Finished goods	50,000	122,000
Accounts receivable		75,000
Prepaid expenses		900
Total current assets		$202,900

The current asset section of the two companies is different from each other because merchandise company directly acquire finished goods from wholesaler or manufacturer and therefore does not report the work-in-process, raw material, and inventory. Also, merchandising company reports the finished goods handled as merchandising inventory.