FINANCIAL ACCOUNTING (LL)W/CONNECT
18th Edition
ISBN: 9781260801071
Author: PHILLIPS
Publisher: McGraw-Hill Publishing Co.
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Chapter 6, Problem 10MC
To determine
The effect of the changein the gross profit percentage of the Company for the current year while comparing with the last year.
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This year your company has purchased less expensivemerchandise inventory but has not changed its sellingprices. What effect will this change have on the company’sgross profit percentage this year, in comparison to lastyear?a. The ratio will not change.b. The ratio will increase.c. The ratio will decrease.d. Cannot determine
Which of the following statements is correct?
When cost of goods sold as a percentage of sales increases, the gross profit margin will increase.
If the gross profit margin increases from one year to the next, then the net profit margin will also increase from one year to the next.
If the gross profit margin is the same for the current and past year, then sales and cost of goods sold in dollars did not change.
It is possible that when cost of goods sold in dollars increases, cost of goods sold as a percentage of sales decreases.
In a period of rising prices,a. cost of goods sold under LIFO will be less than under FIFO.b. gross profit under FIFO will be higher than under LIFO.c. LIFO inventory will be greater than FIFO inventory.d. net income under LIFO will be higher than under FIFO.
Chapter 6 Solutions
FINANCIAL ACCOUNTING (LL)W/CONNECT
Ch. 6 - Prob. 1QCh. 6 - If a Chicago-based company ships goods on...Ch. 6 - Define goods available for sale. How does it...Ch. 6 - Define beginning inventory and ending inventory.Ch. 6 - Describe how transportation costs to obtain...Ch. 6 - What is the main distinction between perpetual and...Ch. 6 - Why is a physical count of inventory necessary in...Ch. 6 - What is the difference between FOB shipping point...Ch. 6 - Describe in words the journal entries that are...Ch. 6 - What is the distinction between Sales Returns and...
Ch. 6 - Prob. 11QCh. 6 - In response to the weak economy, your companys...Ch. 6 - Prob. 13QCh. 6 - Why are contra-revenue accounts used rather than...Ch. 6 - What is gross profit? How is the gross profit...Ch. 6 - Prob. 1MCCh. 6 - Prob. 2MCCh. 6 - Prob. 3MCCh. 6 - Prob. 4MCCh. 6 - Prob. 5MCCh. 6 - Prob. 6MCCh. 6 - Prob. 7MCCh. 6 - Prob. 8MCCh. 6 - A company bundles a product and service that...Ch. 6 - Prob. 10MCCh. 6 - Distinguishing among Operating Cycles Identify the...Ch. 6 - Calculating Shrinkage in a Perpetual Inventory...Ch. 6 - Accounting for Inventory Transportation Costs XO...Ch. 6 - Prob. 4MECh. 6 - Evaluating Inventory Cost Components Assume...Ch. 6 - Recording Journal Entries for Purchases and Safes...Ch. 6 - Prob. 7MECh. 6 - Prob. 8MECh. 6 - Prob. 9MECh. 6 - Prob. 10MECh. 6 - Calculating Shrinkage and Gross Profit in a...Ch. 6 - Prob. 12MECh. 6 - Preparing a Multistep Income Statement Sellall...Ch. 6 - Computing and Interpreting the Gross Profit...Ch. 6 - Computing and Interpreting the Gross Profit...Ch. 6 - Interpreting Changes in Gross Profit Percentage...Ch. 6 - Determining the Cause of Increasing Gross Profit...Ch. 6 - Understanding Relationships among Gross Profit and...Ch. 6 - Prob. 19MECh. 6 - Recording Journal Entries for Purchase Discounts...Ch. 6 - Recording Journal Entries for Sales and Sales...Ch. 6 - Recording Journal Entries for Sales and Sales...Ch. 6 - Prob. 23MECh. 6 - Prob. 24MECh. 6 - Relating Financial Statement Reporting to Type of...Ch. 6 - Inferring Merchandise Purchases The Gap, Inc., is...Ch. 6 - Identifying Shrinkage and Other Missing inventory...Ch. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - Inferring Missing Amounts Based on Income...Ch. 6 - Reporting Purchases and Purchase Discounts Using a...Ch. 6 - Reporting Purchases, Purchase Discounts, and...Ch. 6 - Items Included in Inventory PCM, Inc., is a direct...Ch. 6 - Prob. 10ECh. 6 - Reporting Net Sales after Sales Discounts The...Ch. 6 - Reporting Net Sales after Sales Discounts and...Ch. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Analyzing and Recording Sales and Gross Profit...Ch. 6 - Prob. 15ECh. 6 - Inferring Missing Amounts Based on Income...Ch. 6 - Analyzing Gross Profit Percentage on the Basis of...Ch. 6 - Analyzing Gross Profit Percentage on the Basis of...Ch. 6 - (Supplement 6A) Recording Journal Entries for...Ch. 6 - (Supplement 6A) Recording Journal Entries for...Ch. 6 - (Supplement 6A) Recording Journal Entries for...Ch. 6 - (Supplement 6A) Recording Journal Entries for...Ch. 6 - Prob. 23ECh. 6 - Prob. 24ECh. 6 - (Supplement 6A) Recording Journal Entries for Net...Ch. 6 - Prob. 26ECh. 6 - Prob. 27ECh. 6 - Prob. 28ECh. 6 - (Supplement 6A) Recording Purchases and Sales...Ch. 6 - Purchase Transactions between Wholesale and Retail...Ch. 6 - Prob. 2CPCh. 6 - Recording Cash Sales, Credit Sales, Sales Returns,...Ch. 6 - Prob. 4CPCh. 6 - Preparing a Multistep Income Statement and...Ch. 6 - (Supplement A) Recording Inventory Transactions...Ch. 6 - Reporting Purchase Transactions between Wholesale...Ch. 6 - Reporting Sales Transactions between Wholesale and...Ch. 6 - Recording Sales with Discounts and Returns and...Ch. 6 - Prob. 4PACh. 6 - Preparing a Multistep Income Statement and...Ch. 6 - (Supplement A) Recording Inventory Transactions...Ch. 6 - Reporting Purchase Transactions between Wholesale...Ch. 6 - Prob. 2PBCh. 6 - Prob. 3PBCh. 6 - Prob. 4PBCh. 6 - Preparing a Multistep Income Statement and...Ch. 6 - (Supplement A) Recording Inventory Transactions...Ch. 6 - Reporting Cash, Inventory Orders, Purchases,...Ch. 6 - Preparing Journal Entries for Inventory Purchases,...Ch. 6 - Finding Financial Information Refer to the...Ch. 6 - Prob. 2SDCCh. 6 - Ethical Decision Making: A Mini-Case Assume you...Ch. 6 - Prob. 5SDCCh. 6 - Preparing Multistep Income Statements and...Ch. 6 - Prob. 1CC
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- Bhushan Company has been using LIFO for inventory purposes because it would prefer to keep gross profits low for tax purposes. In its second year of operation (20-2), the controller pointed out that this strategy did not appear to work and suggested that FIFO cost of goods sold would have been higher than LIFO cost of goods sold for 20-2. Is this possible? REQUIRED Using the information provided, compute the cost of goods sold for 20-1 and 20-2 comparing the LIFO and FIFO methods.arrow_forwardIf a company has three lots of products for sale, purchase 1 (earliest) for $17, purchase 2 (middle) for $15, purchase 3 (latest) for $12, which of the following statements is true? A. This is an inflationary cost pattern. B. This is a deflationary cost pattern. C. The next purchase will cost less than $12. D. None of these statements can be verified.arrow_forwardUse the following hypothetical data for Walgreens in Years 11 and 12 to project revenues, cost of goods sold, and inventory for Year +1. Assume that Walgreenss Year +1 revenue growth rate, gross profit margin, and inventory turnover will be identical to Year 12. Project the average inventory balance in Year +1 and use it to compute the implied ending inventory balance.arrow_forward
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- Bulldogs Inc. has recently calculated the inventory turnover for the currently year to be 30. In prior years, the same ratio was always lower. Which of the following statements would be the best interpretation for the reason for the ratio’s change? a. The company purchased less inventory in the current year than in prior years. b. The company had less sales in the current year than in prior years. c. The company took more days to sell its inventory in the current year than in prior years. d. The company took fewer days to sell its inventory in the current year than in prior years.arrow_forwardAssume that the ending inventory of a merchandising firm is overstated by $40,000. a. By how much and in what direction (overstated or understated) will the firms cost of goods be misstated? b. If this error is not corrected, what effect will it have on the subsequent period's operating income? c. If this error is not corrected, what effect will it have on the total operating income of the two periods (the period in which there is an error and the subsequent period) combined?arrow_forwardThe management of Norton Corp. is considering the effects of various inventory-costing methods on its financial statements and its income tax expense. Assuming that the price the company pays for inventory is increasing, which method will: (a) provide the highest net income? (b) result in the most stable earnings over a number of years? (c) result in the lowest income tax expense? (d) provide the highest ending inventory?arrow_forward
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