In trend analysis, of what amount is each item expressed as a percentage? Select

Question

In trend analysis, of what amount is each item expressed as a percentage?

Select one:

A. Average total assets

B. A base year amount

C. Net income

D. Sales revenue

A single-step income statement for a merchandising firm:

Select one:

A. Shows a different net income amount than a multiple-step income statement

B. May not be used because it is an unacceptable reporting format

C. Does not show a gross profit on sales amount

D. None of the above

On the income statement of a merchandising company, interest income and interest expense are reported:

Select one:

A. By showing interest income as additional sales revenue and interest expense as an operating expense

B. As part of cost of goods sold

C. As separate items of other income and expense below the net operating income or loss

D. By offsetting interest income and interest expense and showing the excess as an operating revenue or expense

Explanation / Answer

1) Solution: net income

Explanation: In trend analysis each item is expressed as % of net income

2) Solution: Does not show a gross profit on sales amount

Explanation: The major limitation of single-step income statement is that it does not compute the gross profit of the business

3) Solution: By offsetting interest income and interest expense and showing the excess as an operating revenue or expense

Explanation: Interest income and income expense shows the amount a merchandising company pays on their debt on their deposit accounts, and is reported as net on the income statement

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