Review this chapter’s opening feature involving Emily and Betsy and Sword & Plough. 

Required 

1. Assume that Sword & Plough sells a $300 gift certificate to a customer, collecting the $300 cash in advance. Prepare the journal entry for 

(a) Collection of the cash for delivery of the gift certificate to the customer 

(b) Revenue from the subsequent delivery of merchandise when the gift certificate is used. 

2. How can keeping less inventory help to improve Sword & Plough’s profit margin? 

3. Emily and Betsy understand that many companies carry considerable inventory, and they are thinking of carrying additional inventory of merchandise for sale. Provide at least one reason for, and one reason against, carrying additional inventory.