Deck 12: Financial Statements, Closing Entries, and Reversing Entries

Question 1

Which of the following lists of items is used to compute the cost of goods available for sale?

A) Delivered cost of purchases and beginning inventory
B) Sales, beginning inventory, and ending inventory
C) Net sales, beginning inventory, and ending inventory
D) Gross profit, beginning inventory, and ending inventory
E) Beginning inventory and ending inventory

Answer 1

A

Question 2

Assuming Net Sales is $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, General Expenses are $22,800, and Interest Expense is $2,000, then Income from Operations is

A) $27,700.
B) $49,700.
C) $101,000.
D) $95,300.
E) $72,500.

Answer 2

B

Question 3

Assuming Net Sales are $164,000, Cost of Goods Sold is $83,000, Selling Expenses are $23,000, and General Expenses are $24,000, then Net Income is

A) $200,000.
B) $80,000.
C) $128,000.
D) $34,000.
E) $81,000.

Answer 3

D

Question 4

On a classified balance sheet, wages payable is classified as:

A) a current asset.
B) a general expense.
C) a long-term liability.
D) a current liability.
E) a revenue account.

Question 5

A net income will result if gross profit is greater than

A) purchases.
B) cost of goods available for sale.
C) cost of goods sold.
D) operating expenses.
E) ending inventory.

Question 6

Debts that are due to be paid within one year or within the company's operating cycle are called

A) liquid liabilities.
B) current liabilities.
C) quick liabilities.
D) deferred liabilities.
E) long-term liabilities.

Question 7

Cost of goods sold may be computed by

A) adding beginning inventory and ending inventory together.
B) subtracting ending inventory from cost of goods available for sale.
C) subtracting beginning inventory from cost of goods available for sale.
D) adding beginning inventory to cost of goods available for sale.
E) subtracting beginning inventory from net purchases.

Question 8

If Ending Merchandise Inventory is $22,000, Purchases are $85,000, Purchases Discounts are $1,800, Freight In is $3,500, and Beginning Merchandise Inventory is $28,000, then Cost of Goods Sold is

A) $80,700.
B) $90,300.
C) $79,700.
D) $92,700.
E) $107,000.

Question 9

Cost of goods available for sale is equal to

A) delivered cost of purchases minus Freight In.
B) delivered cost of purchases plus Freight In.
C) delivered cost of purchases plus beginning inventory.
D) delivered cost of purchases minus beginning inventory.
E) Freight In plus ending inventory.

Question 10

Net sales of Clean Spectacles is $90,000, cost of goods sold is $54,000, selling expenses are $17,000, and general expenses are $12,500. Which of the following is its gross profit?

A) $19,000
B) $173,500
C) $36,000
D) $83,500
E) $6,500

Question 11

Operating Expenses consist of

A) Interest Expense and General Expenses.
B) Selling Expenses and Cost of Goods Sold.
C) Interest Expense and Selling Expenses.
D) General Expenses and Selling Expenses.
E) Interest Expense and Cost of Goods Sold.

Question 12

Purchases differ from delivered cost of purchases by the amount of

A) Purchases Returns and Allowances, Purchases Discounts, and Freight In.
B) ending merchandise inventory.
C) the cost of goods available for sale.
D) the cost of goods sold.
E) beginning inventory.

Question 13

Net purchases is equal to

A) Purchases minus Purchases Returns and Allowances plus Purchases Discounts.
B) Purchases plus Purchases Returns and Allowances plus Purchases Discounts.
C) Purchases minus Purchases Returns and Allowances minus Purchases Discounts.
D) Purchases plus Freight In minus Purchases Discounts.
E) Purchases minus Freight In plus Purchases Returns and Allowances.

Question 14

An example of Other Income for a firm other than a bank or real estate office is

A) Rent Income.
B) Interest Income.
C) Gain on Disposal of Property and Equipment.
D) all of these.
E) none of these.

Question 15

Examples of current assets are

A) supplies capable of being used up within twelve months.
B) merchandise inventories convertible into cash within twelve months or less.
C) receivables convertible into cash within twelve months or less.
D) all of these.
E) none of these.

Question 16

In the chart of accounts, account number 211 falls under the:

A) Assets section.
B) Liabilities section.
C) Revenue section.
D) Cost of Goods Sold section.
E) Expenses section.

Question 17

On the income statement, adding delivered cost of purchases to beginning merchandise inventory results in

A) cost of goods available for sale.
B) gross profit.
C) cost of goods sold.
D) net income or net loss.
E) ending inventory.

Question 18

Net sales of Thomas Company is $180,600, cost of goods sold is $144,400, selling expenses are $15,200, general expenses are $22,600, and interest expense is $1,500. Which of the following is the net income (loss) of Thomas Company?

A) $3,100
B) $36,200
C) $(1,600)
D) $13,600
E) $(3,100)

Question 19

If the Cash Short and Over account has a debit balance, the amount is reported under

A) Other Income.
B) Other Expenses.
C) Selling Expenses.
D) Miscellaneous General Expense.
E) Interest Income.

Question 20

On an income statement, net sales minus cost of goods sold equals

A) delivered cost of purchases.
B) cost of goods available for sale.
C) net income.
D) gross profit.
E) beginning inventory.

Question 21

A reversing entry for the accrued wages adjusting entry will

A) give the Wages Payable account a zero balance.
B) give the Wages Expense account a zero balance.
C) give the Wages Expense account a debit balance.
D) cause a larger net income than if the reversing entry was not prepared.
E) cause a smaller net income than if the reversing entry was not prepared.

Question 22

Inventory would appear on a balance sheet as

A) a current asset.
B) part of property and equipment.
C) a current liability.
D) a long-term liability.
E) either a current asset or a current liability.

Question 23

Which of the following are NOT examples of selling expenses

A) Sales Salary Expense
B) Advertising Expense
C) Delivery Expense
D) Insurance Expense

Question 24

A reversing entry could be used if

A) there is an adjusting entry.
B) the adjusting entry increases an asset or liability account.
C) the adjusting entry account did not have a previous balance.
D) all of these were true.
E) none of these were true.

Question 25

Which of the following are NOT examples of General Expenses?

A) Office Salary Expense
B) Advertising Expense
C) Rent Expense
D) Property Tax Expense

Question 26

The current ratio would probably be of most interest to

A) creditors.
B) management.
C) the owner.
D) customers.
E) the Internal Revenue Service.

Question 27

The profit on merchandise sold after expenses is

A) Gross Sales
B) Gross Profit
C) Net Sales
D) Net Income

Question 28

If Current Assets are $103,000, Property and Equipment is $130,000, Current Liabilities are $61,000, and Long-Term Liabilities are $105,000, the current ratio is

A) 1.69 to 1.
B) .98 to 1.
C) 3.82 to 1.
D) 2.22 to 1.
E) 1.02 to 1.

Question 29

Net Sales is

A) Sales + Sales Returns & Allowances - Sales Discounts
B) Sales - Sales Returns & Allowances + Sales Discounts
C) Sales - Sales Returns & Allowances - Sales Discounts
D) Sales + Sales Returns & Allowances + Sales Discounts

Question 30

Net income is the final figure after all expenses have been deducted from revenues on a(n):

A) income statement.
B) statement of owner's equity.
C) balance sheet.
D) statement of cash flows.

Question 31

Subclassifications of operating expenses are

A) Selling Expenses
B) General Expenses
C) Both A & B
D) Neither A or B

Question 32

Which of the following accounts has a credit balance and is closed into Income Summary in the closing entries of a merchandising business?

A) Sales
B) Freight in
C) Depreciation Expense, Building
D) Capital
E) Drawings

Question 33

Net Income or Net Profit

A) Are the same
B) Net Income is less than Net Profit
C) Net Profit is the profit before expenses are deducted
D) None of the above

Question 34

Current Assets consist of all of the following EXCEPT

A) Cash
B) Any asset sold or consumed in more than a year
C) Accounts Receivable
D) Merchandise Inventory

Question 35

Income from Operations

A) = Net Sales - COGS - Operating Expenses
B) = Net Sales + COGS - Operating Expenses
C) = Net Sales + COGS + Operating Expenses
D) None of the above

Question 36

Which of the following statements is true?

A) The columns on the financial statements do not represent DR or CR columns.
B) The columns on the financial statement are for making computations.
C) The columns on the financial statement are for listing totals.
D) All of the above.

Question 37

In the work sheet of Parker Company, the current assets amount to $80,000, property and equipment is worth $150,000, current liabilities are $74,000, and long-term liabilities are $125,000. Which of the following is the current ratio of Parker Company? (Round to two decimal places.)

A) 1.08
B) 1.16
C) 0.95
D) 0.85
E) 1.21

Question 38

Land would appear on the balance sheet as

A) a current asset.
B) a current liability.
C) part of property and equipment.
D) a long-term liability.
E) either a current asset or a current liability.

Question 39

Which of the following accounts has a debit balance and is closed into Income Summary in the closing entries of a merchandising business?

A) Purchase Discounts
B) Drawings
C) Capital
D) Wages Expense
E) Interest Income

Question 40

The profit on merchandise sold before expenses is

A) Gross Sales
B) Gross Profit
C) Net Sales
D) Net Income

Question 41

Debts that are due and payable in less than a year

A) Wages Payable
B) Mortgage Payable
C) Long-Term Liabilities
D) All of the above

Question 42

This ratio is useful in revealing a firm's ability to pay its bills.

A) Working Capital
B) Ability to Pay Ratio
C) Current Ratio
D) Long-Term Ratio

Question 43

What would the current ratio be if a company had the following financial information: Current Assets, $150,000; Current Liabilities, $75,000; Total Assets $350,000. Round to one decimal places?

A) 4.7
B) 2
C) 6.6
D) None of the above

Question 44

Working Capital =

A) Current Assets - Long-Term Liabilities
B) Current Assets - Current Liabilities
C) Long Term Assets - Long Term Liabilities
D) Total Assets - Total Liabilities

Question 45

Which of the following statements is true about a current ratio of 1.5?

A) There is $1.50 of current assets available to pay every dollar of current debt.
B) There is $1.50 of owner's equity available to pay every dollar of total debt.
C) The current liabilities are to be repaid at 1.5 times their value.
D) The current liabilities are 1.5 times of current assets.

Question 46

A net loss will occur if revenues are

A) greater than expenses
B) less than expenses
C) equal to expenses
D) greater than Cost of Goods Sold

Question 47

What would be an appropriate account number for Cash?

A) 11
B) 21
C) 31
D) 41

Question 48

What is a weakness of the current ratio?

A) Hard to calculate.
B) Hard to obtain the information.
C) Favors companies with many current assets, but doesn't measure the overall company strength.
D) Doesn't consider enough financial information to be useful.

Question 49

What two measures tell management and short-term creditors if the firm has sufficient capital and can pay its debts?

A) Working Capital Ratio
B) Current Ratio
C) Organizational Ratio
D) A & B

Question 50

Young Corporation has Current Assets of $125,000, Current Liabilities of $50,000, Long-Term Liabilities of $25,000 and Total Assets of $300,000. What is the working capital of Young Corporation?

A) $75,000
B) $150,000
C) $425,000
D) $500,000

Question 51

Which of the following are nominal accounts?

A) Merchandise Inventory
B) Capital
C) Expenses
D) Cash

Question 52

The account number 430 would indicate what type of account?

A) Asset
B) Liability
C) Revenue
D) Expense

Question 53

What would be an appropriate account number for Unearned Revenues?

A) 12
B) 21
C) 32
D) 42

Question 54

Which of the following statements is NOT true about closing entries for a merchandising business?

A) The closing entries for a merchandise business have a different closing order than a service business.
B) Nominal Accounts are closed at the end of the fiscal period.
C) Temporary-equity accounts are closed at the end of the fiscal period.
D) None of the above are true.

Question 55

Assume Net Sales are $225,000, Cost of Goods Sold is $75,000, Selling Expenses are $24,000 and General Expenses are $30,000. Calculate Net Income:

A) $150,000
B) $126,000
C) $246,000
D) $96,000

Question 56

Which of the following would be an appropriate account number for Selling Expenses?

A) 11
B) 21
C) 41
D) 61

Question 57

Which statement is NOT true about the Chart of Accounts?

A) The order of the chart of accounts is important.
B) The first digit in the account number helps identify and organize the accounts in the chart.
C) Income statement accounts are listed before balance sheet accounts.
D) None of the above are true.

Question 58

The ability of an asset to be quickly turned into cash

A) Disposal
B) Liquidity
C) Accrual
D) Profitability

Question 59

Which of the following entries is a general journal entry that is the exact opposite of a previously completed adjusting entry?

A) A Closing Entry
B) A Working Adjustment
C) A Reversing Entry
D) A Temporary Entry

Question 60

A relatively long-lived asset that is held for use in the production or sale of other assets or services

A) Current Asset
B) Note Receivable (Current)
C) Accounts Receivable
D) Property and Equipment

Question 61

Accounts whose balances apply to one fiscal period only are called permanent accounts.

Question 62

On the income statement, the ending merchandise inventory is deducted from the cost of goods available for sale to yield income from operations.

Question 63

Sales plus Sales Returns and Allowances minus Sales Discounts equals Net Sales on the income statement.

Question 64

Cost of Goods Sold is an operating expense on the income statement.

Question 65

Merchandise Inventory is a nominal account.

Question 66

Net Sales is Sales minus Sales Returns and Allowances plus Sales Discounts.

Question 67

Working capital is equal to total assets minus current liabilities.

Question 68

The calculation of the cost of goods available for sale is not affected by the amount of the ending merchandise inventory.

Question 69

The calculation of the cost of goods available for sale is not affected by the amount of the beginning merchandise inventory.

Question 70

Liquidity is the ability to pay all current liabilities in one year.

Question 71

The Interest Income account is classified as Other Income on the income statement.

Question 72

A decrease in Sales Discounts results in a decrease in Net Income.

Question 73

On an income statement, Interest Expense is shown as an Operating Expense.

Question 74

A decrease in Rent Expense results in a decrease in gross profit.

Question 75

Income from Operations is Gross Profit minus Operating Expenses.

Question 76

Long-Term Liabilities are usually listed in the order of their expected payment.

Question 77

An increase in Rent Expense results in a decrease in gross profit.

Question 78

The Sales Discounts account is shown with the Other Expenses on the income statement.

Question 79

Notes receivable are written promises to pay an amount due to creditors.

Question 80

The Purchases account is not classified as a selling expense.