1. Inventory for resale is classified as an operating activity because it is a part of operating the business. Operating activities are those transactions that involve the primary activities of the business. Investing activities involve the purchase of assets for use in the business like equipment or land. 2. One of the controls is separating the handling of cash from the recording of cash. If the cash is handled by the same person recording the cash, it is easier for them to steal and cover it up. A second control is the practice that all cash receipts be deposited daily in bank accounts. This prevents the accumulation of a large amount of cash. The most trusted employees can be tempted with large amounts of cash. A third cash control practice is to require that all cash expenditures be made with prenumbered checks. Payments made by check are well documented and cant be hidden or pocketed as easily as cash. 3. The direct write off can cause more problems than the allowance method because when you are using the direct write off it is hard to match bad debt expenses with the sales that caused them. It is less of a problem to estimate what the total bad debt may be even though it might be somewhat imprecise. 4. It is more difficult to account for the inventory of a manufacturing firm than for a merchandising firm because the former has three different types of inventories; raw materials, work in process, and finished goods. In addition, the work in process and finished goods inventories are composed of raw materials, labor, and manufacturing overhead. Often it is difficult to measure the amount of labor and manufacturing overhead that should be included in the inventory amounts. 5. Purchase discounts and purchase returns are accounted for differently with the two methods. With the periodic method, both discounts and returns are accounted for by