107. Indicate whether each of the following statements is true or false.
_____ a) In a perpetual inventory system, an employee theft is discovered immediately.
_____ b) An adjusting entry is required for inventory losses under a perpetual inventory system.
_____ c) Inventory shrinkage is calculated as the difference between the beginning and ending balances in the merchandise inventory account.
_____ d) In a perpetual inventory system, adjustments for lost, damaged or stolen merchandise are recorded as expenses.
_____ e) The entry to record inventory losses due to employee theft or shoplifting has a negative effect on the statement of cash flows.
108. Indicate whether each of the following statements is true or false.
_____ a) A common size income statement facilitates comparison between two or more companies of different size and in the same industry.
_____ b) A common size income statement is prepared by dividing the various amounts reported on the income statement by the amount of total assets.
_____ c) A common size income statement is helpful in comparing the results of operations in different time periods.
_____ d) The gross margin percentage is computed by dividing gross margin by net income.
_____ e) Return on sales is computed by dividing net income by net sales.