Assume you work as an accountant in the merchandising

Reference no: EM13598529

Assume you work as an accountant in the merchandising division of a large public company that makes and sells athletic clothing. To encourage the merchandising division to earn as much profit on each individual sale as possible, the division managers pay is based in part on the divisions gross profit percentage. To encourage control over the divisions operating expenses, the managers pay also is based on the divisions net income. You are currently preparing the divisions financial statement. The division had a good year with sales of $100000 cost of goods sold of $50000, sales returns and allowances of $60000, sales discounts of $4000, and other selling expenses of $30000. (Assume the division does not report income taxes). The division manager stresses that "It would be in your own personal interest" to classify sales returns and allowances and sales discounts as selling expenses rather than as contra-revenues on the divisions income statement. He justifies this "friendly advice" by saying that hes not asking you to fake the numbers - he just believes that those items items are more accurately reported as expenses. Plus, he claims,being a division of a larger company, you don't have to follow GAAP.

Requirement:

A) Prepare an income statement for the division using the classifications shown in this chapter. Using this income statement, calculate the divisions gross profit percentage.

B) What reasondo you think is motivating the managers advise to you

Reference no: EM13598529

Questions Cloud

Larrys lakeside restaurant is an upscale popular eatery : larrys lakeside restaurant is an upscale popular eatery located on the waterfront. larry is implementing an abc system

Hoosier company manufactures and sells a single product the : hoosier company manufactures and sells a single product. the following costs were incurred during the companys first

This company see saw co pays a weekly payroll assume that : this company see saw co. pays a weekly payroll. assume that the social security tax rate is 6.0 on the first 100000 of

Bruce manufacturing makes and sells a single product the : bruce manufacturing makes and sells a single product. the following costs were incurred during the companys first year

Assume you work as an accountant in the merchandising : assume you work as an accountant in the merchandising division of a large public company that makes and sells athletic

A company receives a note payable for 3500 at 9 for 45 days : a company receives a note payable for 3500 at 9 for 45 days. how much interest to the nearest cent will the customer

Sm weber finances a new automobile by paying 6500 cash : sam weber finances a new automobile by paying 6500 cash and agreeing to make 40 monthly payments of 500 each the first

Adoption of policies that would ultimately provide for : major achievements of the roosevelt administration in the field of conservation included all of the following excepta

Titus corporation and vane corporation two companies of : titus corporation and vane corporation two companies of roughly the same size are both involved in the manufacture of

User Account

All Pages