Question

Multiple Choice Question 98

The gross margin percentage shows how much of each sales dollar is available after which of the following income statement components has been covered?

Operating expenses

Cost of goods sold

Contribution margin

Net income

Multiple Choice Question 106

Which of the following is the reason that preferred dividends declared during the period are deducted from net income in calculating return on common stockholders’ equity?

Preferred dividends will reduce the amount of income available for distribution to common stockholders.

Preferred dividends are not paid from net income.

Preferred dividends are not a part of stockholders’ equity.

Preferred dividends are not paid until all common stockholders have received their dividends, so preferred dividends are not relevant in the formula and so must be taken out of the equation.

Multiple Choice Question 109

Earnings per share must be reported on the face of every income statement that is

prepared in accordance with generally accepted accounting principles.

prepared in accordance with the national association of state boards of accountancy standards.

prepared in accordance with ethical standards set by the american institute of certified public accountants.

prepared in accordance of the federal government.

Answer 1

98)Correct option is "B"- Cost of goods sold

Gross margin is calculated as =Sales- cost of goods sold

106)Correct option is "A"- Preferred dividends will reduce the amount of income available for distribution to common stockholders.

preferred dividend is subtracted while calculating return on common equity from net income because Preferred stockholders have preferential right in terms of dividend and payment at time of liquidation over common stockholders.Thus dividend declared on preferred stock is subtracted from net income while calculating return on common stock equity as they decrease the amount of income available to common stockholders having preferential right

109)Correct option is "A"- prepared in accordance with generally accepted accounting principles

Financial statements are prepared in accordance with US GAAP which requires companies to present Earning per share on face of income statement.