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The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Mulberry Street Sportswear as they appear on the 12/31/11 adjusted trial balance. The following is a listing of some of the balance sheet accounts and all of the income statement accounts for Mulberry Street Sportswear as they appear on the 12/31/11 adjusted trial balance. Required: A) Prepare a multi-step income statement for 2011 for Mulberry Street Sportswear. B) Compute the Gross Profit Percentage for 2011 for Mulberry Street Sportswear. Required: A) Prepare a multi-step income statement for 2011 for Mulberry Street Sportswear. B) Compute the Gross Profit Percentage for 2011 for Mulberry Street Sportswear.

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Segregation of duties means that a company assigns responsibilities so that:


A) sufficient workers are available to cover all necessary jobs.
B) responsibilities for related activities are assigned to two or more people.
C) employees are restricted to jobs for which they have adequate training.
D) workers are divided into those who make decisions and those who carry them out.

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

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Internal control policies and procedures are identical across companies.

A) True
B) False

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Cost of goods sold is reported on both the income statement and the balance sheet.

A) True
B) False

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Which of the following statements regarding sales returns and allowances is true?


A) Recording sales returns and allowances in a separate account is an important internal control that allows management to evaluate the volume of returns and allowances as a potential indicator of the quality of their products.
B) The Sales Returns and Allowances account balance should be added to the Sales account balance when computing net sales.
C) Sales Returns and Allowances account is an example of a contra-asset account.
D) Recording a sales allowance requires two entries.

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

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A company sells goods at a selling price of $20,000. The cost of the goods is $15,000 Under a perpetual inventory system the journal entries to record the sale will include:


A) $15,000 will be debited to Inventory and $15,000 will be credited to Accounts Payable.
B) $15,000 will be debited to Cost of goods sold and $15,000 will be credited to Inventory.
C) $15,000 will be credited to Inventory and $15,000 will be credited to Sales.
D) $15,000 will be debited to Cost of goods sold and $15,000 will be credited to Sales.

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

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Which of the following statements regarding gross profit (margin) is true?


A) Gross margin is net sales minus cost of goods sold.
B) A company sells $10,000 of goods. The gross profit percentage is 32%. Net income would be $3,200.
C) Gross profit is recorded by a credit to the gross profit account.
D) If net sales are $100 and cost of goods sold is $50 then the gross profit percentage is 100%.

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

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A company buys footwear and clothing from manufacturers, which it resells to discount stores in a large urban area. This company is an example of a:


A) wholesale merchandising company.
B) service company.
C) retail merchandising company.
D) secondary service company.

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

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According to the Sarbanes-Oxley Act, the responsibility for issuing a report on a company's internal controls over financial reporting rests with:


A) both the company and its independent auditor.
B) the company.
C) the independent auditor.
D) neither the company nor its independent auditor.

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

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A company sells goods on account at a selling price of $20,000. The cost of the goods is $15,000 .Under a perpetual inventory system the journal entries to record the sale will include:


A) $20,000 will be debited to Inventory and $20,000 will be credited to Accounts Payable.
B) $20,000 will be debited to Cost of goods sold and $20,000 will be credited to Inventory.
C) $15,000 will be credited to Inventory and $15,000 will be credited to Sales.
D) $20,000 will be debited to Accounts receivable and $20,000 will be credited to Sales.

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

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You have received the bank statement for your company's account and need to reconcile it with your cash T-account. Your records show an ending balance for the month of $12,722.40 while the bank's records show an ending balance of $12,367.16.

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The bank charged $8 in service fees and ...

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A retail chain sells 100 designer sheet sets for $199.99 a set; these sheet sets cost the company $69.95 a set to buy. The company also sells 1,000 basic sheet sets for $49.99 a set; these sheet sets cost the company $24.99 to buy. Other operating expenses total $10,000. Which of the following statements is true?


A) The company's net income is $38,004.
B) Rounded to the nearest whole number, the gross profit percentage is 65% on the designer sheets and 50% on the basic sheets.
C) The company's gross profit is $28,004.
D) The total sales for the period are $48,004.

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

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If a company achieves a small increase in its gross profit percentage from one year to the next, the company:


A) will always have a higher net income.
B) must be obtaining products at a lower cost per unit.
C) must have increased its sales revenue.
D) may not have had a volume increase.

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

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A company had the following partial list of account balances at year-end: A company had the following partial list of account balances at year-end: The amount of net sales reported on the income statement would be: A) $57,200. B) $64,200. C) $56,000. D) $55,700. The amount of net sales reported on the income statement would be:


A) $57,200.
B) $64,200.
C) $56,000.
D) $55,700.

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

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Net Income for 2011 would be


A) $8,000
B) $9,000
C) $10,000
D) $14,000

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

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What was the unadjusted balance on the company's books?


A) $18,000
B) $17,230
C) $19,000
D) $20,270

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

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What is the amount of Income before Income Taxes?


A) $9,500
B) $32,700
C) $13,000
D) $17,500

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

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LA Company has a gross profit percentage of 61%, while NY Company has a gross profit percentage of 37%. Which of the following is true?


A) LA Company will report a higher net income than NY Company.
B) NY Company must have a greater sales volume than LA Company.
C) LA Company is more efficient at controlling selling, general, and administrative expenses than NY Company.
D) LA Company and NY Company both earn enough on each sale to make a contribution to their operating costs.

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

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Coca-Cola reported net sales revenues of $19.8 billion and cost of goods sold of $6.0 billion. Its gross profit percentage was:


A) 30.3%.
B) 69.7%.
C) 43.5%.
D) 12 %

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

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When a customer returns a defective product for credit, the seller would record the transaction using which of the following accounts?


A) Purchase Returns and Allowances
B) Sales Returns and Allowances
C) Sales
D) Sales Discounts

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

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