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A retail store that drops all of its product prices by 25% will experience a(n) ________ in its overall gross profit percentage but may experience a(n) ________ in sales volume.


A) increase, increase
B) decrease, decrease
C) increase, decrease
D) decrease, increase

E) A) and C)
F) A) and D)

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What does the gross profit percentage tell you?


A) A higher ratio means that more is available to cover operating expenses.
B) It tells you the dollar amount of profits available to shareholders.
C) A higher ratio means that less profit is available to cover operating expenses.
D) It tells you the company's ability to pay its bills as they come due.

E) A) and D)
F) A) and C)

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XYZ Company sold merchandise for $5,000,with payment terms of 2/10,n/30.If the customer pays within the discount period and takes the discount,XYZ will receive:


A) $4,900
B) $5,000
C) $3,500
D) $100

E) B) and C)
F) B) and D)

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A retail chain sells 100 designer sheet sets for $199.99 a set; the company purchased these sheet sets at $69.95 per set.The company also sells 1,000 basic sheet sets for $49.99 a set.The company purchased these sheet sets at $24.99 per set.Operating expenses equal $10,000. Required: Part a.Calculate the gross profit percentages of each product (rounded to the nearest whole number). Part b.Calculate the total gross profit. Part c.Calculate income before income tax expense

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Part a
Gross profit percentage = [(Net s...

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Which of the following statements about a multistep income statement is not correct?


A) Income before income taxes = Net income + Income tax expense
B) Depreciation is subtracted in the calculation of core operating results.
C) Income from operations = Income before income tax expense + Other revenues (expenses) , net
D) Income from operations = Net income + Income tax expense - Other revenues (expenses) , net

E) A) and C)
F) B) and C)

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In a retail business that uses a perpetual inventory system,scanning a bar code does not:


A) calculate the amount owed by the customer.
B) identify the item sold to be removed from the Inventory account.
C) identify the item sold to be recorded in the Cost of Goods Sold account.
D) calculate the gross profit.

E) All of the above
F) B) and C)

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A company reported a decrease in sales revenue from $860,000 last year to $760,000 this year and a decrease in gross profit from $400,000 last year to $360,000 this year. Required: Part a.Calculate the gross profit percentages for both years. Part b.Was the change in gross profit caused by the change in sales volume,the change in the gross profit per sale,or a combination of the two? Explain.

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Gross profit percentage = [(Net sales - ...

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Assuming the perpetual inventory system is used,which of the following statements about the multistep income statement is correct?


A) Sales discounts affect the calculation of Gross Profit.
B) Contra-accounts affect the Cost of Goods Sold.
C) Contra-revenue accounts increase Other Expenses
D) Sales discounts are a Selling, General, and Administrative Expense.

E) C) and D)
F) All of the above

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When a company collects from a customer who pays within the discount period,the company:


A) debits a contra-revenue account.
B) debits a liability account.
C) credits a liability account.
D) debits a revenue account.

E) C) and D)
F) A) and B)

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Consider the following single-step income statement. Consider the following single-step income statement. Required: Prepare a multistep income statement for Creative Tax Service for the year ended December 31,2016. Required: Prepare a multistep income statement for Creative Tax Service for the year ended December 31,2016.

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A company has net sales of $612,850 and cost of goods sold of $441,252.The company's gross profit percentage is:


A) 72%.
B) 0.28%.
C) 38.9%.
D) 28%.

E) B) and C)
F) All of the above

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Your store buys ice cream at a cost of $1.50 a half gallon and sells it for $4 a half gallon.Selling,general,and administrative expenses are $0.75 per half gallon.Which of the following statements is correct?


A) Your gross profit per half gallon is $2.50.
B) Your gross profit per half gallon is $1.75.
C) The difference between the selling price and the cost is recorded in the gross profit account.
D) The difference between the selling price and the cost is recorded in the Net Profit account.

E) B) and C)
F) All of the above

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Beyer Company bought inventory FOB shipping point from Sellar Company for $4,000 cash,including shipping charges.On December 31,the last day of the accounting year,the goods were on a truck owned by Common Carrier,Inc.,and not expected to arrive until January 3.Which company should include these goods in its December 31 inventory?


A) Beyer should include the $4,000 in its inventory
B) Beyer owns the inventory, but Common Carrier has possession of it. Each of them should include half of the inventory, $2,000 each
C) Common Carrier should include the $4,000 in its inventory, since the inventory is on its truck
D) Beyer owns the inventory, but Common Carrier has possession of it. Neither of them can include the $4,000 in its December 31 inventory

E) A) and D)
F) A) and B)

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The following is a listing of all of the income statement accounts for Mulberry Street Sportswear as they appear on the adjusted trial balance as of December 31. The following is a listing of all of the income statement accounts for Mulberry Street Sportswear as they appear on the adjusted trial balance as of December 31. Required: Part a.Prepare a multistep income statement. Part b.Compute the gross profit percentage. Required: Part a.Prepare a multistep income statement. Part b.Compute the gross profit percentage.

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Part a
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* Selling,General,and Administ...

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In order to calculate shrinkage:


A) both periodic and perpetual inventory systems are needed.
B) a periodic inventory system is more effective.
C) a perpetual inventory system requires an occasional count of actual inventory.
D) it does not matter which system one uses.

E) B) and C)
F) None of the above

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A merchandising company's operating cycle begins with the sale of inventory and ends with the cash collection from sales.

A) True
B) False

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The gross profit percentage is an indication of how:


A) well management is controlling expenses.
B) measures the percentage of profit earned on each dollar of sales.
C) much cash is generated per dollar of sales.
D) efficient management is in utilizing assets.

E) A) and B)
F) A) and C)

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Over a two-year period,Beneful Product's gross profit percentage went from 70.4% to 69.7%.Which of the following could not have been the cause of this change?


A) Reduced selling prices
B) Rising product cost as a percentage of sales
C) Increased competition from a competitor
D) An increase in selling price

E) B) and C)
F) None of the above

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Which of the following statements is not correct about sales returns and allowances?


A) Sales returns and allowances can provide useful information about the quality of inventory and the possibility of unsatisfied customers.
B) Sales returns and allowances are recorded in a separate contra-revenue account.
C) Sales returns and allowances are always disclosed in external financial statements.
D) Sales returns and allowance are subtracted to determine net sales.

E) None of the above
F) A) and C)

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The journal entry to record taking a discount when paying for goods previously purchased on account:


A) decreases assets and liabilities
B) increases assets and stockholders' equity
C) decreases liabilities and increases in stockholders' equity
D) decreases assets and stockholders' equity

E) All of the above
F) C) and D)

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