Q&A Hero

Q: 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.

Q: ​Pension funds whose contributions are dictated by the benefits that will eventually be provided are called ____ plans. a. ​defined-benefit b. ​defined-contribution c. ​beneficiary d. ​guarantor-insured

Q: Assume that sales discounts in the current year exceed sales discounts in the prior year. Assume that nothing else changes. Required: Determine the impact of an increase in sales discounts on the companys gross profit percentage (that is, whether it will increase, decrease, or not be affected). Include a simple example to prove your answer.

Q: 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

Q: The asset composition of private pension portfolios is most heavily concentrated in a. corporate bonds. b. mortgages. c. common stock. d. money market securities.

Q: Nonqualified private pension plans offer tax deferral benefits to employees, but with qualified plans, income is taxed before it is contributed to the plan. a. True b. False Indicate the answer choice that best completes the statement or answers the question.

Q: A company sells three different products. Model A costs $8 and sells for $16, Model B costs $18 and sells for $45, and Model C costs $36 and sells for $120. Required: Part a. Calculate the gross profit per unit for each of the three products. Part b. Calculate the gross profit percentage for each of the three products.

Q: In recent years, defined-contribution plans have commonly been replaced by defined-benefit plans. a. True b. False

Q: During its first month of operations, Purrfect Pets purchased 6,000 bags of dog food at a cost of $5 a bag and sold all 6,000 bags of dog food on account with payment terms of 3/10, net 30 for $10 each. A total of 2,600 of these bags were sold to customers who paid within the discount period; the other customers paid after the discount period had ended. Sales allowances totaling $200 were granted to customers whose dogs did not like the dog food. Required: Part a. Calculate the gross profit for the month. Part b. Calculate the gross profit percentage for the month.

Q: A defined-benefit plan provides benefits that are determined by the accumulated contributions and the fund's investment performance. a. True b. False

Q: Consider the following single-step income statement. Creative Products, Inc. Income Statement For the year ended December 31, 2016 Net Sales $50,250 Expenses: Cost of Goods Sold 30,000 Selling, General, and Administrative Expenses 10,000 Interest Expense 5,000 Income Tax Expense 1,575 Total Expenses 46,575 Net Income $ 3,675 Required: Prepare a multistep income statement for Creative Tax Service for the year ended December 31, 2016.

Q: Underfunded pension plans are primarily a problem with defined-contribution pension plans. a. True b. False

Q: Two different companies, Ripper and Berners, entered into the following inventory transactions during December. Both companies use a perpetual inventory system. December 3 Ripper Corporation sold inventory on account to Berners Corp. for $480,000, terms 2/10, n/30. This inventory originally cost Ripper $320,000. December 8 Berners Corp. returned inventory to Ripper Corporation for a credit of $30,000. Ripper returned this inventory to inventory at its original cost of $20,000. December 12 Berners Corp. paid Ripper Corporation for the amount owed. Required: Part a. Prepare the journal entries to record these transactions on the books of Ripper Corporation. Part b. What is the amount of net sales to be reported on Ripper Corporations income statement? Part c. What is the Ripper Corporations gross profit percentage?

Q: A pension fund manager might hedge against interest rate movements by selling bond futures contracts. a. True b. False

Q: Garcia Company is trying to decide whether to purchase identical inventory from one of the following suppliers. Supplier A Supplier B Cost $100 $110 Invoice terms 1/10, n/30 2/10, n/30 Shipping terms FOB shipping point FOB destination Shipping cost $10 $12 Assume the company will pay within the discount period. Required: What is the actual cost of the inventory if purchased from each supplier?

Q: Projective funding limits the manager's discretion, allowing only investments that match future payouts. a. True b. False

Q: Indicate whether the Inventory account is debited (Dr), credited (Cr), or neither (N) when using a perpetual inventory system to record each of the following transactions: 1. _____ The company purchases $3,000 of goods intending to sell them to customers. 2. _____ The company returns $200 of damaged goods to the supplier. 3. _____ The company pays a shipping firm $685 to ship an order of goods from the supplier to the company. 4. _____ The company receives a purchase discount for prompt payment to a supplier. 5. _____ Customers return $550 of goods in excellent condition to the company. 6. _____ The company sells $4,600 of goods to consumers. 7. _____ The company purchases $1,600 of supplies intending to use them internally. 9. _____ The company does a physical count and finds three items missing due to shrinkage.

Q: The composition of the stocks in a pension fund's portfolio is determined by the fund's portfolio managers. a. True b. False

Q: Explain whether the following items should be included in the inventory of Simpson Company. Item a. Goods sold FOB shipping point by Simpson are in transit to its customer. Item b. Goods sold FOB destination by Simpson are in transit to its customer.

Q: Indicate whether the statement is true or false.Taking speculative positions in stock options is generally not considered appropriate for retirement funds because of the high degree of risk involved.a. Trueb. False

Q: Tesoro Corp. uses a perpetual inventory system. The following activities occurred during May: May 2 Tesoro purchased $45,000 worth of inventory, on credit terms 3/10 n/30. May 2 Because the terms of the purchase were FOB shipping point, Tesoro pays $1,200 to the trucker. May 5 Tesoro returned $5,000 worth of that inventory to the supplier. May 10 Tesoro paid for the inventory, taking advantage of all available discounts. Required: Prepare the journal entries to record these transactions on the books of Tesoro Corp.

Q: Which type of life insurance policy specifically accommodates the needs of people who need more insurance now than later?​ a. ​whole life b. ​term c. ​decreasing term d. ​universal life

Q: Dunedin Inc. began the month with inventory of $10,000 and then purchased inventory at a cost of $105,000. The perpetual inventory system indicates that inventory costing $94,000 was sold during the month for $141,000. An inventory count shows that inventory costing $20,100 is actually on hand at month-end. Required: What amount of shrinkage occurred during the month?

Q: Which of the following is NOT involved in the regulation of the insurance industry? a. National Association of Insurance Commissioners (NAIC) b. Insurance Regulatory Information System (IRIS) c. Federal Deposit Insurance Corporation (FDIC) d. All of these are involved in regulating the insurance industry.

Q: Morey Company starts the period with 1,000 units in inventory, purchases 13,000 additional units, returns 100 units to suppliers, and has 950 in inventory at the end of the period. Required: If there is no shrinkage, how many units were sold?

Q: The largest single source of funds for a life insurance company is a. life insurance premiums. b. annuity plans. c. health insurance premiums. d. investment income. e. None of these are correct.

Q: Which inventory system (periodic or perpetual) inventory system provides the best inventory control?

Q: ____ are the most popular assets of life insurance companies. a. Corporate debt securities and stocks b. Treasury securities c. Mortgages and mortgage-backed securities d. State and local bonds

Q: What are the differences between the periodic and the perpetual inventory systems? (Do not address or list the actual journal entries made in each system.)

Q: Which of the following statements is NOT correct? a. Insurance provides a payment to the insured under conditions specified by the insurance policy contract. b. Individuals who are less exposed to specific conditions that cause financial damage are more likely to purchase insurance against those conditions. c. Insurance can cause the insured to take more risks because they are protected. d. Insurance companies employ underwriters to calculate the risk of specific insurance policies.

Q: Use the information above to answer the following question. The journal entry necessary at the end of the period to adjust cost of goods sold for the ending inventory still on hand will include which of the following? A) Debit Inventory for $6,250 B) Credit Cost of Goods Sold for $11,250 C) Credit Purchases for $10,200 D) Credit Inventory for $5,000

Q: With a(n) ____ insurance policy, the benefits awarded by the life insurance company to the beneficiary differ, depending on the assets backing the policy. a. universal life b. whole life c. variable life d. group life e. None of these are correct.

Q: Use the information above to answer the following question. The journal entry necessary at the end of the period to transfer beginning inventory and net purchases to cost of goods sold will include which of the following? A) Credit Inventory for $6,250 B) Debit Purchases for $11,250 C) Debit Inventory for $6,250 D) Debit Cost of Goods Sold for $11,250

Q: An insurance companys liquidity is measured as a. net profit minus losses. b. premium income minus policy expenses. c. invested assets divided by loss reserves and unearned premium reserves. d. None of these are correct.

Q: Use the information above to answer the following question. What is the amount of cost of goods available for sale? A) $11,250 B) $17,500 C) $5,000 D) $13,750

Q: A retailer using a periodic inventory system returned $3,000 of defective inventory which was purchased on account from one of its wholesale suppliers. The entry to record this transaction on the retailers books would include a debit to: A) Accounts Receivable. B) Cost of Goods Sold. C) Accounts Payable. D) Inventory.

Q: ____ insurance covers losses due to a contract not being fulfilled.​ a. ​Fidelity bond b. ​Credit line c. ​Surety bond d. ​Business interruption

Q: Which of the following is a difference between life insurance companies and property and casualty insurance companies? a. Property and casualty policies are longer term. b. The types of policies offered by life insurance companies are less focused. c. Future compensation amounts to be paid on property and casualty policies are more difficult to forecast. d. Life insurance companies need to maintain a more liquid asset portfolio.

Q: On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use a periodic inventory system. What journal entry will be recorded by Dee Company on July 1? A) Debit Purchases and credit Accounts Payable for $6,000 B) Debit Inventory and credit Accounts Receivable for $6,000 C) Debit Inventory and credit Accounts Payable for $6,000 D) Debit Cost of Goods Sold and credit Inventory for $4,500

Q: ​____ is(are) not a typical source of funds for life insurance companies. a. ​Deposit insurance premiums b. ​Annuity plans c. ​Investment income d. ​Life and health insurance premiums

Q: On October 1, Robertson Company sold inventory in the amount of $5,800 to Alberta, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses the periodic inventory system. On October 4, Alberta returns some of the inventory. The selling price of the inventory is $500 and the cost of the inventory returned is $350. What journal entry (entries) will be recorded by Robertson October 4? A) Debit Sales Returns & Allowances and credit Accounts Receivable for $500; debit Inventory and credit Cost of Goods Sold for $350 B) Debit Sales Returns & Allowances and credit Accounts Receivable for $500 C) Debit Accounts Receivable and credit Sales Returns & Allowances for $500 D) Debit Accounts Receivable and credit Sales Returns & Allowances for $500; debit Cost of Goods Sold and credit Inventory for $350

Q: The most common use of funds for property and casualty insurance companies is for a. corporate bonds and municipal securities. b. Treasury bills. c. corporate stock. d. commercial paper.

Q: On October 1, Robertson Company sold inventory in the amount of $5,800 to Alberta, Inc. with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses a periodic inventory system. Alberta pays the invoice on October 8 and takes the appropriate discount. What journal entry will be recorded by Robertson on October 8? A) Debit Cash and credit Accounts Receivable for $5,800 B) Debit Cash and credit Accounts Receivable for $4,000 C) Debit Cash for $3,920, debit Sales Discounts for $80, and credit Accounts Receivable for $4,000 D) Debit Cash for $5,684, debit Sales Discounts for $116, and credit Accounts Receivable for $5,800

Q: ​_____ insurance provides a financial payout if specified employees of a business become disabled or die. a. ​Best person b. ​Employment liability c. ​Key employee d. ​Credit line

Q: On October 1, Robertson Company sold inventory in the amount of $5,800 to Alberta, Inc. with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Robertson uses a periodic inventory system. The journal entry (or entries) prepared by Robertson on October 1 is (are): A) Debit Sales Revenue and credit Accounts Receivable for $5,800. B) Debit Sales Revenue and credit Accounts Receivable for $5,800; debit Cost of Goods Sold and credit Inventory for $4,000. C) Debit Accounts Receivable and credit Sales Revenue for $5,800. D) Debit Accounts Receivable and credit Sales Revenue for $5,800; Debit Cost of Goods Sold and credit Inventory for $4,000.

Q: Those insurance companies whose claims are ____ predictable need to maintain ____ liquidity. a. less; less b. more; more c. less; more d. None of these are correct.

Q: An account used in the periodic inventory system that is not used in the perpetual inventory system is: A) Inventory B) Sales C) Sales Returns & Allowances D) Purchases

Q: Under ____, the benefits awarded by the life insurance company to a beneficiary vary with the assets backing the policy.​ a. ​whole life insurance b. ​term insurance c. ​variable life insurance d. ​universal life insurance

Q: Use the information above to answer the following question. The gross profit percentage would be closest to: A) 25.6%. B) 31.5%. C) 55.6%. D) 68.5%.

Q: ​____ insurance covers losses due to dishonest employees. a. ​Key employee b. ​Credit line c. ​Malpractice d. ​Fidelity bond

Q: Use the information above to answer the following question. Net income would be: A) $8,000. B) $9,000. C) $10,000. D) $14,000.

Q: Which type of life insurance policy does NOT build a cash value for policyholders? a. whole life b. term c. universal life d. All of these build a cash value.

Q: Use the information above to answer the following question. Income from operations would be: A) $6,000. B) $10,000. C) $11,000. D) $12,000.

Q: Which type of life insurance policy can offer flexibility on the size and timing of premium payments? ​ a. ​whole life b. ​term c. ​universal life d. ​decreasing term

Q: Use the information above to answer the following question. Gross profit would be: A) $35,000. B) $37,000. C) $41,000. D) $71,000.

Q: ____ mortgages are the most common type of mortgage held by life insurance companies. a. Commercial b. Residential c. Farm d. None of these are correct.

Q: Use the information above to answer the following question. Net sales would be: A) $30,000. B) $124,000. C) $130,000. D) $160,000.

Q: Mortgage insurance protects a. homeowners against damage to their home from storms, fire, or other hazards. b. homeowners in the event that they cannot make their mortgage payments. c. the lender who provided the mortgage in the event that the homeowner defaults on the mortgage. d. All of these are correct.

Q: Which of the following statements about gross profit percentages is correct? A) Because gross profit percentages are so consistent from period to period, they are not very useful for analyzing one company over time. B) Because gross profit percentages are so variable across industries, they are most useful in comparing companies from different industries. C) Because gross profit percentages are so variable across industries, they are more useful in analyzing one company over time. D) Because gross profit percentages are so consistent across industries, they are most useful in comparing companies from different industries.

Q: The ____ facilitates cooperation among the various state agencies whenever an insurance issue is a national concern. a. Securities and Exchange Commission b. Federal Deposit Insurance Corporation c. National Association of Insurance Commissioners d. National Association of Securities Dealers e. None of these are correct.

Q: Lansing Company has a gross profit percentage of 61%, while Arbor Company has a gross profit percentage of 37%. Which of the following statements is correct? A) Lansing Company will report a higher net income than Arbor Company. B) Arbor Company must have a greater sales volume than Lansing Company. C) Lansing Company is more efficient at controlling selling, general, and administrative expenses than Arbor Company. D) Lansing Company and Arbor Company both earn enough on each sale to make a contribution to their operating costs.

Q: Pixie Products reported net sales revenue of $18.8 billion and cost of goods sold of $5.6 billion, while Stardust Inc. reported net sales revenue of $22.3 billion and cost of goods sold of $9.3 billion. Which of the following statements is correct? A) While Stardust Inc. generated more revenue than Pixie Inc., Stardust Inc. generated a lower gross profit percentage. B) Pixie Inc. generated a lower gross profit percentage because its sales revenue was lower. C) Stardust Inc. did a better job of controlling product costs as a percentage of sales than did Pixie Inc. D) The selling price of the products sold by Pixie Inc. must have been higher than the price of products sold by Stardust Inc.

Q: ​____ effectively reallocates a portion of an insurance company's return and risk to other insurance companies. a. ​Reinsurance b. ​Cash flow underwriting c. ​Factor insurance d. ​Universal insurance

Q: ​A ____ life insurance company is owned by its policyholders; most life insurance companies are ____. a. ​stock-owned; mutual b. ​mutual; mutual c. ​stock-owned; stock-owned d. ​mutual; stock-owned

Q: Carrington Inc. 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) 3.3%. D) 2.3 %

Q: 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

Q: ____ insurance provides insurance for a policyholder only over a specified period. a. Term b. Whole life c. Universal d. Term AND Universal

Q: The practice of adapting insurance prices to interest rates by lowering premiums when interest rates rise and raising premiums when interest rates decline is called a. cyclical rate adjusting. b. collateralizing premiums. c. cash flow underwriting. d. reinsurance.

Q: If a company achieves a small increase in its gross profit percentage from one year to the next, the company: A) will have a higher net income. B) must be obtaining products at a lower cost per unit. C) must have increased its sales revenue. D) might not have had a sales volume increase.

Q: The ratio of an insurance company's net profit to policyholders' surplus is called the a. liquidity ratio. b. return on net worth. c. net underwriting margin. d. return on assets.

Q: Angle Inc. announces that its gross profit rose 5% but its income before income taxes fell. Which of the following statements is correct? A) This is not possible given that net income is determined by gross profit. B) This must mean that selling, general, and administrative expenses increased by more than 5%. C) This must mean that sales revenue rose more than expenses. D) This must mean that cost of goods sold fell.

Q: 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

Q: Life insurance companies can attempt to reduce their exposure to interest rate risk by​ a. ​increasing their proportion of long-term assets. b. ​diversifying the age distribution of their customer base. c. ​increasing their proportion of short-term assets. d. ​concentrating on an older age distribution of their customer base.

Q: A company reported a gross profit percentage of 25% with net sales of $347,800. What is the amount of cost of goods sold? A) $86,950 B) $260,850 C) $326,063 D) $108,688

Q: A company has gross profit of $58,300 and a gross profit percentage of 25%. What were the company's net sales? A) $233,200. B) $14,575. C) $72,825. D) $711,260

Q: ​The adverse selection problem as related to the insurance industry means that people who have insurance are less likely to suffer losses than people who do not have insurance.a. Trueb. False

Q: 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%.

Q: Property and casualty (PC) insurance companies may use cash flow underwriting, in which they tend to lower their premium prices as interest rates rise. ​ a. True b. False

Q: Which of the following statements regarding gross profit percentage is not correct? A) It is possible for a company to increase both its gross profit percentage and net income without increasing the dollar amount of sales. B) A decreasing gross profit percentage means that the company is selling products for a greater markup over its cost. C) The gross profit percentage measures the percentage of profit earned on each dollar of sales. D) Gross profit percentages vary across industries.

Q: Policyholders who prefer to invest their savings themselves will likely opt for whole life insurance over term insurance.​ a. True b. False