The gross profit technique implies that A. The value of the inventory has not grown from prior years. B. The gross profit remains at the same level as in previous years. C. The correlation between sales and gross profit is consistent over time. D. Compared to prior years, neither sales nor cost of items sold have changed.

The gross profit technique implies that A. The value of the inventory has not grown from prior years. B. The gross profit remains at the same level as in previous years. C. The correlation between sales and gross profit is consistent over time. D. Compared to prior years, neither sales nor cost of items sold have changed.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 5DQ

See similar textbooks

Similar questions

The use of the gross profit method assumes A. Inventory values have not increased from previous years. B. The amount of gross profit is the same as in prior years. C. The relationship between gross profit and sales remains stable over time. D. Sales and cost of goods sold have not changed from previous years.
Which of the following statements is correct? Group of answer choices A)When cost of goods sold as a percentage of sales decreases, the gross profit percentage will decrease. B)It is possible that when cost of goods sold in dollars increases, cost of goods sold as a percentage of sales decreases. C)If gross profit percentage is the same for the current and past year, then sales and cost of goods sold in dollars did not change. d)If gross profit percentage increases from one year to the next, then the net income percentage will also increase from one year to the next. E)None of the above
Which of the following is false? Select one: a. Days’ sales in inventory is equal to the average number of days it takes to sell inventory. b. Higher days’ sales in inventory means that inventory is less likely to become obsolete because it is sold in fewer days c. Inventory ratio is equal to the number of times inventory was completely purchased and sold (turned over) during the period. d. Inventory turnover ratio is calculated by dividing COGS by the average value of inventory over the period.
Overstating ending inventory in the current year causes net income in the current year to be overstated. Select one: True False Using the weighted-average cost method, the average cost of inventory is calculated as the average unit cost of inventory purchased during the year. Select one: O True O False During periods of rising costs, FIFO generally results in a higher cost of goods sold. Select one: O True False During periods of rising costs, LIFO generally results in a higher ending inventory balance. Select one: O True O False
Which of the following is false? Select one: a. Day's sales in inventory is equal to the average number of days it takes to sell inventory b. Higher Day's sales in inventory means that inventory is less likely to become obsolete because it is sold in fewer days c. Inventory ratio is equal to the number of times inventory was completely purchased and sold (turn over) during the period d. Inventory turnover ratio is calculated by dividing COGS by the average value of inventory over the period
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.
An increase in the inventory turnover rate is indicative of: Multiple Choice a decrease in the cost of goods sold. a decrease in the supply of inventory. an increase in the supply of inventory. an increase in sales revenue.
During periods of declining prices, when comparing LIFO and FIFO inventory methods: A. LIFO inventory and cost of goods sold would be higher than FIFO B. LIFO inventory and cost of goods sold would be lower than FIFO. C. LIFO inventory would be lower and cost of goods sold would be higher than FIFO. D. LIFO inventory would be higher and cost of goods sold would be lower than FIFO.
1. If the inventory account at the end of the year is understated, the effect will be to a.overstate the gross profit on sales. b.understate the net purchases. c. overstate the cost of goods sold. d.overstate the goods available for sale 2. Which one among the following statements is not a characteristic of the integral view of presenting interim financial statements? a.It is the more acceptable view. b.Each interim period is recognized as a separate accounting period, regardless of the length of time involved. c. Each interim period is a part of the annual period. d.The revenues and expenses for the annual period are allocated among interim periods 3. What is correct concerning the 75% overall size test for operating segments? a. The total external and internal revenue of all reportable segments is 75% or more of the entity’s external revenue. b. The total external revenue of all reportable segments is 75% or more of the entity’s external and internal revenue. c. The total external…
1. In a period of rising prices, the inventory reported in Huang Company's balance sheet is close to the replacement cost of the inventory. Gajurel Company's inventory is considerably below its current cost. Identify the inventory cost flow method being used by each company. Which company has probably been reporting the higher gross profit? 2. Identify and explain two ratios that help management determine whether or not there is sufficient inventory on hand.
Compared to using the FIFO method to account for inventory, during periods of risingprices, a company using the LIFO method is most likely to report higher:A. net income.B. cost of sales.C. income taxes
What is inventory shrinkage? The difference between product cost and retail selling price. The loss of sales revenue due to lowering sales prices. The discrepancy between the perpetual system generated Inventory level and actual physical inventory on hand. The inaccuracy of vendor invoices regarding what was physically shipped. What would be the most favorable cost flow assumption method when calculating gross margin in a time of high inflation? FIFO Specific LIFO Average