Question 1

The entry to close Sales Revenue includes a debit to Income Summary.

Accepted Answer

The entry to close Sales Revenue includes a credit to Income Summary.

Question 2

An adjusted trial balance for a merchandiser is given below.
  Prepare the journal entry to close the revenue and other income accounts.Omit explanation.

Accepted Answer

The answer of An adjusted trial balance for a merchandiser...

Question 3

The net income calculated using either the single-step or multi-step income statement formats is always the same.

Accepted Answer

The net income calculation is the same regardless of which income statement format is used. The only difference between the single-step and multi-step formats is the presentation of the information.

Question 4

Operating income equals gross profit minus operating expenses.

Accepted Answer

Operating income is calculated by subtracting the operating expenses from the gross profit earned by a company. Therefore, the statement is true.

Question 5

A single-step income statement shows subtotals for gross profit and operating income.

Accepted Answer

A multi-step income statement shows subtotals for gross profit and operating income.

Question 6

An adjusted trial balance for a sole proprietorship is given below.There were no new capital contributions during the year. $$\begin{array} { | l | r | r | } 
\hline &  { \text { Debit } } & \text { Credit } \
\hline \text { Cash } & \$ 14,000 & \
\hline \text { Accounts Receivable } & 5,000 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 26,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,500 \
\hline \text { Notes Payable } & & 600 \
\hline \text { Lorenzo, Capital } &  &8,000 \
\hline \text { Lorenzo, Withdrawals } &1,000 &  \
\hline \text { Sales Revenue } &  & 98,500\
\hline \text { Cost of Goods Sold } & 23,000& \
\hline \text { Salaries Expense } & 19,000 & \
\hline \text { Rent Expense } & 15,000 & \
\hline \text { Selling Expense } & 8,400 & \
\hline \text { Supplies Expense } &  \underline { 600 }\
\hline \text { Total } & \$ 112,800 & \$ 112,800  \
\hline
\end{array}$$ What will be the final balance in the company's Lorenzo,Capital account after recording the closing
Entries?

Accepted Answer

To find the final balance in the Lorenzo, Capital account after closing entries, we first calculate the net income and then adjust the capital account for withdrawals and net income. Net income is calculated as follows: Sales Revenue - (Cost of Goods Sold + Salaries Expense + Rent Expense + Selling Expense + Supplies Expense) = $98,500 - ($23,000 + $19,000 + $15,000 + $8,400 + $600) = $98,500 - $66,000 = $32,500. The initial balance in the Lorenzo, Capital account is $8,000. We add the net income of $32,500 and subtract withdrawals of $1,000. Thus, the final balance is $8,000 + $32,500 - $1,000 = $39,500.

Question 7

A merchandiser uses a perpetual inventory system.The beginning Owner,Capital balance of the merchandiser was $99,000.During the year,Sales Revenue amounted to $75,000,Cost of Goods Sold was $32,000,and all other expenses totaled $10,000.Owner withdrawals were $21,000.There were no new capital contributions during the year.The last step in the closing process would include ________.

Accepted Answer

The answer of A merchandiser uses a perpetual inventory system.The...

Question 8

A merchandiser uses a perpetual inventory system.The third step in the process of closing the accounts of a merchandiser is to ________.

Accepted Answer

The third step in closing accounts is to close the Income Summary account to the Owner, Capital account, making the Income Summary account equal to zero.

Question 9

The trial balance for a merchandiser,before the journal entries below,is as follows.A physical count of inventory at the end of the accounting year reveals $28,000 of inventory on hand.(Assume a perpetual inventory system.)
 $$\begin{array} { | l | r | r | } 
\hline &  { \text { Debit } } & { \text { Credit } } \
\hline \text { Cash } & \$ 12,600 & \
\hline \text { Accounts Receivable } & 2,400 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 30,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,000 \
\hline \text { Notes Payable } & & 800 \
\hline \text { Yung, Capital } &&13,800 \
\hline \text { Yung, Withdrawals } & 1,000  &  \
\hline \text { Sales Revenue } &  &96,000\
\hline \text { Cost of Goods Sold } &23,000& \
\hline \text { Delivery Expense } &  2,000 & \
\hline \text { Salaries Expense } & 21,000 & \
\hline \text { Rent Expense } & 14,000 & \
\hline \text { Selling Expense } &8,500  \
\hline \text { Supplies Expense }& \underline { 500 }  \
\hline \text {Total} & \$ 115,800 & \$ 115,800\
\hline
\end{array}$$ Prepare the journal entry to record the inventory shrinkage and prepare all closing entries.Omit explanations.

Accepted Answer

The answer of The trial balance for a merchandiser,before the...

Question 10

When using the perpetual inventory system,the entry to close Cost of Goods Sold will include a debit to Income Summary.

Accepted Answer

The entry to close Sales Discounts Forfeited will include a credit to Income Summary.

Question 11

An adjusted trial balance for a merchandiser is given below.
 $$\begin{array} { | l | r | r | } 
\hline & { \text { Debit } } &{ \text { Credit } } \
\hline \text { Cash } & \$ 12,600 & \
\hline \text { Accounts Receivable } & 2,400 & \
\hline \text { Prepaid Rent } & 800 & \
\hline \text { Merchandise Inventory } & 30,000 & \
\hline \text { Accounts Payable } & & \$ 4,200 \
\hline \text { Salaries Payable } & & 1,000 \
\hline \text { Notes Payable } & &800 \
\hline \text { Black, Capital } & &13,800  \
\hline \text { Black, Withdrawals } &1,000 & \
\hline \text { Sales Revenue } & &  96,000\
\hline \text { Sales Discounts Forfeited } &&400  \
\hline \text { Cost of Goods Sold } & 23,000 & \
\hline \text { Insurance Expense } & 2,400 & \
\hline \text { Salaries Expense } & 21,000   & \
\hline \text { Rent Expense } &14,000 & \
\hline \text { Selling Expense } & 8,500 & \
\hline \text { Supplies Expense } &\underline { 500 }   \
\hline \text { Total }&\$ 116,200 & \$ 116,200
\end{array}$$ Provide journal entries to close the Income Summary account and the Black,Withdrawals account.Omit explanations.

Accepted Answer

The answer of An adjusted trial balance for a merchandiser...

Question 12

Cost of Goods Sold appears on a multi-step income statement but not on a single-step income statement.

Accepted Answer

Both multi-step and single-step income statements include the Cost of Goods Sold, but they present it differently. The multi-step format separates it from operating expenses, while the single-step format combines it with all expenses.

Question 13

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed.Which of the following is credited to close the Income Summary account?

Accepted Answer

The Income Summary account, which shows a credit balance (indicating a profit), is closed to the Owner's Capital account to reflect the increase in equity resulting from the period's earnings.

Question 14

Under IFRS,Cost of Goods Sold represents a functional expense which explains the purpose of the cost incurred.

Accepted Answer

This statement is true. Under IFRS, Cost of Goods Sold (COGS) is considered a functional expense as it is directly linked to the production or sale of goods. It represents the cost incurred in the production of goods that have been sold during a period.

Question 15

An adjusted trial balance for a merchandiser is given below.
 $$\begin{array} { | l | r | r | } 
\hline & { \text { Debit } } &{ \text { Credit } } \
\hline \text { Cash } & \$ 12,600 & \
\hline \text { Accounts Receivable } &  2,400 & \
\hline \text { Prepaid Rent } &800& \
\hline \text { Merchandise Inventory } &30,000 &   \
\hline \text { Accounts Payable } & &\$ 4,200  \
\hline \text { Salaries Payable } & &1,000  \
\hline \text { Notes Payable } & & 800 \
\hline \text { Brown, Capital } &&13,800 \
\hline \text { Brown, Withdrawals } &  1,000&  \
\hline \text { Sales Revenue } & &96,000 \
\hline \text { Sales Discounts Forfeited } && 400 \
\hline \text { Cost of Goods Sold } &  23,000 & \
\hline \text { Insurance Expense } &   2,400& \
\hline \text { Salaries Expense } & 21,000& \
\hline \text { Rent Expense } &  14,000 & \
\hline \text { Selling Expense } &8,500 & \
\hline \text { Supplies Expense } &\underline { 500 }  \
\hline \text { Total }& \$ 116,200 & \$ 116,200\
\hline
\end{array}$$ Prepare the journal entry to close the expense accounts.Omit explanation.

Accepted Answer

The answer of An adjusted trial balance for a merchandiser...

Question 16

A merchandiser uses a perpetual inventory system.The beginning Owner,Capital balance of the merchandiser was $120,000.During the year,Sales Revenue amounted to $80,000,Cost of Goods Sold was $45,000,and all other expenses totaled $12,000.Owner withdrawals were $27,000.There were no new capital contributions during the year.The ending balance of Owner,Capital would be ________.

Accepted Answer

B) The closing journal entries would be:
 11ea8873_d46e_82c0_bb89_6df46a5206f4_TB5026_00 11ea8873_d46e_82c1_bb89_a5e6d2fc4f15_TB5026_00 11ea8873_d46e_82c2_bb89_9bd37425ac60_TB5026_00 11ea8873_d46e_82c3_bb89_757cb9ac0b92_TB5026_00 Ending balance of Owner, Capital:
 11ea8873_d46e_a9d4_bb89_cbef24ed516e_TB5026_00

Question 17

A merchandiser has sales discounts forfeited of $600,cost of goods sold of $13,000,and other expenses of $4,100.The merchandiser uses a perpetual inventory system.The second entry in the closing process would include ________.

Accepted Answer

A) The debit to Income Summary includes: cost of goods sold of $13,000 and other expenses of $4,100.

Question 18

The Sales Revenue,Delivery Expense,and Sales Discounts Forfeited accounts will be closed via the ________ account.

Accepted Answer

The Sales Revenue, Delivery Expense, and Sales Discounts Forfeited accounts are all income statement accounts. At the end of the accounting period, these accounts are closed via the Income Summary account, which then transfers the net income or net loss to the Owner, Capital account. This process is part of the closing entries. Therefore, Choice A is the best option.

Question 19

In a multi-step income statement,interest revenue and interest expense are included in operating income.

Accepted Answer

In a multi-step income statement, interest revenue and interest expense are included in income before income tax expense.

Question 20

A merchandiser reports sales revenue of $24,000 and sales discounts forfeited of $1,440.The merchandiser uses a perpetual inventory system.The first entry in the closing process would include ________.

Accepted Answer

The first entry in the closing process involves transferring the total revenue to the Income Summary account. In this case, the total revenue includes both the sales revenue of $24,000 and the sales discounts forfeited of $1,440, totaling $25,440. Therefore, a credit to Income Summary for $25,440 is correct, as it increases the Income Summary account by the total revenue amount.

Quiz 5: Merchandising Operations

The entry to close Sales Revenue includes a debit to Income Summary.

An adjusted trial balance for a merchandiser is given below. Prepare the journal entry to close the revenue and other income accounts.Omit explanation.

The net income calculated using either the single-step or multi-step income statement formats is always the same.

Operating income equals gross profit minus operating expenses.

A single-step income statement shows subtotals for gross profit and operating income.

A merchandiser uses a perpetual inventory system.The third step in the process of closing the accounts of a merchandiser is to ________.

When using the perpetual inventory system,the entry to close Cost of Goods Sold will include a debit to Income Summary.

Cost of Goods Sold appears on a multi-step income statement but not on a single-step income statement.

The Income Summary account has a credit balance of $25,000 after the revenue and expense accounts have been closed.Which of the following is credited to close the Income Summary account?

Under IFRS,Cost of Goods Sold represents a functional expense which explains the purpose of the cost incurred.

A merchandiser has sales discounts forfeited of $600,cost of goods sold of $13,000,and other expenses of $4,100.The merchandiser uses a perpetual inventory system.The second entry in the closing process would include ________.

The Sales Revenue,Delivery Expense,and Sales Discounts Forfeited accounts will be closed via the ________ account.

In a multi-step income statement,interest revenue and interest expense are included in operating income.

A merchandiser reports sales revenue of $24,000 and sales discounts forfeited of $1,440.The merchandiser uses a perpetual inventory system.The first entry in the closing process would include ________.