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Chapter 1: Problem 1

Indicate whether each of the following companies is primarily a service, merchandise, or manufacturing business. If you are unfamiliar with the company, use the Internet to locate the company鈥檚 home page or use the finance Web site of Yahoo 1\. H\&R Block 2\. eBay Inc. 3\. Wal-Mart Stores, Inc. 4\. Ford Motor Company 5\. Citigroup 6\. Boeing 7\. SunTrust 8\. Alcoa Inc. 9\. Procter \& Gamble 10\. FedEx 11 Gap Inc. 12\. Hilton Hospitality, Inc. 13\. CVS 14\. Caterpillar 15\. The Dow Chemical Company

Short Answer

Expert verified
Service: H&R Block, eBay, Citigroup, SunTrust, FedEx, Hilton. Merchandise: Wal-Mart, Gap, CVS. Manufacturing: Ford, Boeing, Alcoa, Procter & Gamble, Caterpillar, Dow Chemical.

Step by step solution

01

Understanding Categories

Businesses are often classified into three major categories: service, merchandise, and manufacturing. A service business provides intangible products, a merchandise business sells tangible products to consumers, and a manufacturing business creates tangible products from raw materials.
02

Classifying H&R Block

H&R Block provides tax preparation services, which are intangible services to individuals and businesses. Therefore, H&R Block is primarily a service business.
03

Classifying eBay Inc.

eBay operates an online marketplace where sellers can list items and buyers can purchase them. Though it facilitates the sale of tangible goods, eBay itself primarily offers a service鈥攃onnecting buyers and sellers. So, it is a service business.
04

Classifying Wal-Mart Stores, Inc.

Wal-Mart is known as a major retail corporation, selling a wide array of tangible products directly to consumers. Thus, Wal-Mart is a merchandise business.
05

Classifying Ford Motor Company

Ford manufactures automobiles and related products, converting raw materials into finished vehicles. As such, Ford is primarily a manufacturing business.
06

Classifying Citigroup

Citigroup offers financial services like banking, investment, and insurance. These are intangible services provided to businesses and individuals, making Citigroup a service business.
07

Classifying Boeing

Boeing manufactures airplanes and defense products. The business transforms raw materials into aircraft, classifying Boeing as a manufacturing business.
08

Classifying SunTrust

SunTrust offers banking and financial services to its clients. This involves providing intangible financial services, defining SunTrust as a service business.
09

Classifying Alcoa Inc.

Alcoa is involved in the production of aluminum and related materials. As it processes raw materials into aluminum products, Alcoa is a manufacturing business.
10

Classifying Procter & Gamble

Procter & Gamble manufactures consumer goods, including hygiene and health products. It transforms raw materials into finished goods, making it a manufacturing business.
11

Classifying FedEx

FedEx provides courier and delivery services, transporting goods from one place to another. Its primary work is in logistics and service provision, so FedEx is a service business.
12

Classifying Gap Inc.

Gap Inc. sells clothing and accessories via its retail stores and online platforms. It sources tangible goods and sells these to consumers, categorizing it as a merchandise business.
13

Classifying Hilton Hospitality, Inc.

Hilton Hospitality operates hotels and resorts, offering lodging and related services. These are intangible hospitality services, classifying Hilton as a service business.
14

Classifying CVS

CVS operates retail pharmacies, selling a variety of health and wellness products. This activity places CVS as a merchandise business as it focuses on selling tangible goods.
15

Classifying Caterpillar

Caterpillar designs and manufactures heavy machinery and equipment. As it is involved in producing tangible goods from raw materials, Caterpillar is a manufacturing business.
16

Classifying The Dow Chemical Company

The Dow Chemical Company produces chemicals and plastic materials, converting raw materials into chemical products. Thus, it is a manufacturing business.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Service Business
A service business is one that provides intangible products, which means products you cannot touch or hold. These businesses focus on experiences or activities that are consumed at the point of delivery. They include sectors such as finance, healthcare, hospitality, and professional services.

One of the main features of service businesses is the emphasis on customer service and experience. For example, H&R Block offers tax preparation services, providing expertise and consultation rather than a physical product. Similarly, companies like Hilton Hospitality and SunTrust provide intangible services in hospitality and banking, respectively.
  • Intangible products like consulting, banking, or hotel stays
  • Personalized customer experiences
  • Focus on service delivery over physical product sales
Merchandise Business
Merchandise businesses are companies that sell tangible products to consumers. These businesses source products, either as finished goods from manufacturers or through wholesalres, and sell them to consumers via retail or online stores. They are largely involved in the selling of goods rather than in their production.

Retail giants like Wal-Mart or CVS fall under this category as they operate by selling numerous consumer products directly to customers. Similarly, Gap Inc. is another example, specializing in clothing and accessories.
  • Selling tangible products like clothes, electronics, or groceries
  • Retail-focused operations
  • Customer transactions involve the exchange of money for physical goods
Manufacturing Business
A manufacturing business is involved in using raw materials, components, or sub-assemblies to produce a finished product. These businesses are the backbone of supply chains as they create the tangible goods that merchandise businesses sell.

Companies like Ford Motor Company and Boeing operate in this category, as they transform raw inputs into complex finished products like automobiles and aircraft. Similarly, Procter & Gamble and Caterpillar produce consumer goods and heavy machinery, respectively, showing the diverse range of manufacturing operations.
  • Transforming raw materials into finished goods
  • Involvement in large-scale production
  • Supply chain and logistics for distributing products to retailers

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Most popular questions from this chapter

The total assets and total liabilities of Coca-Cola and PepsiCo are shown below. \begin{tabular}{lrc} & Coca-Cola (in millions) & PepsiCo (in millions) \\ \hline Assets & \(\$ 29,963\) & \(\$ 29,930\) \\ Liabilities & 13,043 & 14,483 \end{tabular} Determine the owners' equity of each company.

Donna Ahern is the owner and operator of Omega, a motivational consulting business. At the end of its accounting period, December 31, 2009, Omega has assets of \(760,000 and liabilities of \)240,000. Using the accounting equation and considering each case independently, determine the following amounts: a. Donna Ahern, capital, as of December 31, 2009. b. Donna Ahern, capital, as of December 31, 2010, assuming that assets increased by \(120,000 and liabilities increased by \)72,000 during 2010. c. Donna Ahern, capital, as of December 31, 2010, assuming that assets decreased by \(60,000 and liabilities increased by \)21,600 during 2010. d. Donna Ahern, capital, as of December 31, 2010, assuming that assets increased by \(100,000 and liabilities decreased by \)38,400 during 2010. e. Net income (or net loss) during 2010, assuming that as of December 31, 2010, assets were \(960,000, liabilities were \)156,000, and there were no additional investments or withdrawals.

Financial information related to Teflon Company, a proprietorship, for the month ended April 30, 2010, is as follows: Net income for April $ 93,780 Hedi Fry鈥檚 withdrawals during April 10,000 Hedi Fry, capital, April 1, 2010 715,320 Prepare a statement of owner鈥檚 equity for the month ended April 30, 2010.

Four different proprietorships, Jupiter, Mercury, Saturn, and Venus, show the same balance sheet data at the beginning and end of a year. These data, exclusive of the amount of owner鈥檚 equity, are summarized as follows: Total Assets Total Liabilities Beginning of the year \( 810,000 \)324,000 End of the year 1,296,000 540,000 On the basis of the above data and the following additional information for the year, determine the net income (or loss) of each company for the year. (Hint: First determine the amount of increase or decrease in owner鈥檚 equity during the year.) Jupiter: The owner had made no additional investments in the business and had made no withdrawals from the business. Mercury: The owner had made no additional investments in the business but had withdrawn \(72,000. Saturn: The owner had made an additional investment of \)162,000 but had made no withdrawals. Venus: The owner had made an additional investment of \(162,000 and had withdrawn \)72,000.

Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3) owner鈥檚 equity: a. accounts payable b. cash c. fees earned d. land e. supplies f. wages expense
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