Profit Margin
Calculate profit margin for 20×7 using the following data: A company has net income of $7,000 and net sales of $82,000 in 20×7.
Develop a brief answer to each of the following questions.
1. When a company has net income, what happens to its assets and/or to its liabilities?
2. Why must a company that gives a guaranty or warranty with its product or service show an expense in the year of sale rather than in a later year when a repair or replacement is made?
3. Is accrual accounting more closely related to a company’s goal of profitability or liquidity?
4. Will the carrying value of a long-term asset normally equal its market value?
