Deck 13: Financial Statements and Closing Procedures

Question 1

Which of the following is not a current asset?
A)Accounts Receivable

A)Prepaid Insurance
B)Merchandise Inventory
D)Equipment

Answer 1

D

Question 2

An income statement that has one total for all revenues and one total for all expenses is known as a

A)categorized income statement.
B)multiple-step income statement.
C)classified income statement.
D)single-step income statement.

Answer 2

D

Question 3

The beginning capital balance shown on a statement of owner's equity is $36,000. Net income for the period is $16,000. The owner withdrew $20,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is

A)$40,000.
B)$72,000.
C)$32,000.
D)$36,000.

Answer 3

C

Question 4

If the Income Summary account has a credit balance after revenues, and expenses are closed, the firm had a net income for the fiscal period.

Question 5

The beginning capital balance shown on a statement of owner's equity is $64,000. Net income for the period is $23,000 and the owner withdrew $30,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is

A)$64,000.
B)$117,000.
C)$71,000.
D)$57,000.

Question 6

The statement of owner's equity is prepared before the balance sheet so that the ending owner's capital balance is available for the balance sheet.

Question 7

The adjusting entry to record depreciation should be reversed at the start of a new fiscal period to make subsequent financial record keeping easier.

Question 8

The balance of the owner's drawing account is reported

A)in the Operating Expenses section of the income statement.
B)in the Current Assets section of the balance sheet.
C)in the Other Expenses section of the income statement.
D)on the statement of owner's equity.

Question 9

At the end of the period, the balance of the Accounts Receivable account is closed to the Income Summary account.

Question 10

When a firm experiences a net loss, the owner's capital is decreased.

Question 11

Gross profit on sales is calculated as

A)net sales minus operating expenses.
B)sales minus sales returns and allowances.
C)net sales minus cost of goods sold .
D)net sales plus cost of goods sold.

Question 12

Which of the following statements is correct?

A)The term single-step income statement is sometimes used to describe a classified income statement.
B)Salaries of office employees would be grouped with the selling expenses in the Operating Expenses section of the income statement.
C)If a business is to earn a net income, the gross profit on sales must be greater than operating expenses.
D)Sales less Operating Expenses equals Gross Profit.

Question 13

The beginning capital balance shown on a statement of owner's equity is $80,000. Net income for the period is $37,000. The owner made no additional investments during the period. The owner's capital balance at the end of the period is $96,000. The amount the owner withdrew for personal use during the period is

A)$37,000.
B)$16,000.
C)$80,000.
D)$21,000.

Question 14

Current assets are usually listed on a balance sheet in order of liquidity.

Question 15

Current assets provide the funds needed to pay bills and meet expenses.

Question 16

The beginning capital balance shown on a statement of owner's equity is $80,000. Net income for the period is $35,000. The owner withdrew $18,000 cash from the business and made no additional investments during the period. The owner's capital balance at the end of the period is

A)$63,000.
B)$133,000.
C)$97,000.
D)$80,000.

Question 17

The total of the operating expenses for the period is added to the gross profit on sales to determine the net income or net loss from operations.

Question 18

After all adjusting entries are posted, the balances of the general ledger accounts should match the amounts shown in the Adjusted Trial Balance section of the worksheet.

Question 19

The balance of the Sales Returns and Allowances account is reported as a selling expense in Operating Expenses section of a multiple-step income statement.

Question 20

Interest on notes payable would be listed in the Other Expenses section of a classified income statement.

Question 21

Use the following account balances from the adjusted trial balance columns of Goody Chocolate's
Worksheet to answer below question.


-
Using the adjusted trial balance above, select the correct closing entry that Goody Chocolate would make to close the expense accounts (and cost of goods sold accounts with debit balances)at the end of the accounting period.

A)

B)

C)

D)

Question 22

Prepaid expenses appear in the

A)Operating Expenses section of the income statement.
B)Current Liabilities section of the balance sheet.
C)Other Expenses section of the income statement.
D)Current Assets section of the balance sheet.

Question 23

Use the following account balances from the adjusted trial balance columns of RB Auto's
Worksheet to answer below question.


-
Select the closing entry that RB Auto would make at the end of the accounting period to close their revenue accounts and income statement accounts with credit balances.

A)debit Income Summary for $15,000 and credit Sales for $15,000.
B)debit Sales for $15,000; debit R Holloway, Capital for $13,000 and credit Income Summary
For $28,000.
C)debit Sales $15,000; debit Purchase Returns and Allowances $200 and credit Income Summary for $15,200.
D)debit Sales and credit Income Summary for $15,000.

Question 24

Which of the following statements is not correct?

A)A current ratio of 3.5 to 1 means that a firm has $3.50 in current liabilities for every $1 of current assets.
B)The gross profit percentage is calculated by dividing the gross profit for the year by the net sales for the year.
C)Working capital is the difference between total current assets and total current liabilities.
D)The average inventory is calculated by adding the beginning inventory to the ending inventory and dividing the sum by 2.

Question 25

A total of $8,000 in supplies was purchased during the year. By the end of the year, the company had used up $5,300 of the supplies. The adjusting entry needed at the end of the year is:

A)

B)

C)

D)

Question 26

Use the following account balances from the adjusted trial balance columns of RB Auto's
Worksheet to answer below question.


-
Select the correct closing entry that RB Auto would make to close the owner's withdrawal account at the end of the accounting period.

A)debit R. Holloway, Capital $500 and credit R. Holloway, Drawing for $500.
B)debit R. Holloway, Drawing $500 credit R. Holloway, Capital for $500.
C)debit Income Summary $500 and credit R. Holloway, Drawing for $500.
D)debit R. Holloway, Drawing $500 and credit Income Summary for $500.

Question 27

Which of the following groups of accounts will have zero balances after the closing process is completed?

A)Depreciation Expense and Accumulated Depreciation-Equipment
B)Allowance for Doubtful Accounts and Uncollectible Accounts Expense
C)Purchases and Purchases Returns and Allowances
D)Merchandise Inventory and Sales

Question 28

Which of the following accounts is not closed at the end of the accounting period?

A)Purchase Discounts
B)Capital
C)Depreciation Expense
D)Sales

Question 29

Which of the following accounts will appear on the post-closing trial balance?

A)Sales
B)Payroll Taxes Expense
C)Miscellaneous Income
D)Medicare Tax Payable

Question 30

Use the following account balances from the adjusted trial balance columns of Goody Chocolate's
Worksheet to answer below question.


-
Using the adjusted trial balance above, select the correct closing entry that Goody Chocolate would make to close their revenue accounts (and other temporary income statement accounts with credit balances)at the end of the accounting period.

A)

B)

C)

D)

Question 31

The Income Summary account, for Edgar's Cigars appears below. Based on the data contained in the account, determine which of the statements below is correct.
Income Summary

A)Edgar's Cigars will report an $11,000 net loss for the period ending 12/31
B)Edgar's Cigars will report net income of $7,000 for the period ending 12/31
C)Edgar's Cigars will report a $7,000 net loss for the period ending 12/31
D)Edgar's Cigars will report net income of $11,000 for the period ending 12/31

Question 32

Use the following account balances from the adjusted trial balance columns of RB Auto's
Worksheet to answer below question.


-
Select the correct closing entry that RB Auto would make to close their expense account(s)at the end of the accounting period.

A)debit R. Holloway, Capital $9,000 and credit Salary Expense $4,000; credit Rent Expense
$3,000; credit Purchases $2,000
B)debit Income Summary $9,000 and credit Salary Expense $4,000; credit Rent Expense $3,000; credit Purchases $2,000
C)debit Salary Expense $4,000; debit Rent Expense $3,000; debit Purchases $2,000 and credit
Income Summary $9,000
D)debit Income Summary $9,000 and credit R. Holloway, Capital for $9,000

Question 33

On May 1, Brown's Antiques paid $18,000 for 12 months of advance rent on its store and immediately debited the asset account Prepaid Rent for the full amount. Select the adjusting entry made on December 31, to record the amount of rent that had expired.

A)

B)

C)

D)

Question 34

Which of the following accounts is not closed at the end of the accounting period?

A)Interest Expense
B)Accumulated Depreciation
C)Depreciation Expense
D)Sales

Question 35

The accountant of Randy's Flooring has closed all of the temporary income statement accounts. The accountant is now ready to close the Income Summary account. The owner of the company is
R. Car. Using the Income Summary T-account below, determine the correct closing entry the accountant needs to make in order to close the account.
Income Summary

A)

B)

C)

D)

Question 36

Which of the following accounts would be closed at the end of the accounting period?

A)Capital
B)Accumulated Depreciation
C)Prepaid Rent
D)Depreciation Expense

Question 37

Which of the following accounts is not closed at the end of the accounting period?

A)Merchandise Inventory
B)Purchases
C)Rent Expense
D)Sales

Question 38

Which of the following accounts would be closed at the end of the accounting period?

A)Merchandise Inventory
B)Purchases
C)Prepaid Rent
D)Accumulated Depreciation

Question 39

Which of the following accounts is not closed at the end of the accounting period?

A)Sales
B)Depreciation Expense
C)Accounts Receivable
D)Purchases

Question 40

The Income Summary account, for Wise Tools appears below. Based on the data contained in the account, determine which of the statements below is correct.
Income Summary

A)Wise Tools will report net income of $1,000 for the period ending 12/31
B)Wise Tools will report net income of $6,000 for the period ending 12/31
C)Wise Tools will report a $1,000 net loss for the period ending 12/31
D)Wise Tools will report a $6,000 net loss for the period ending 12/31

Question 41

Which of the following statements is not correct?

A)In the closing process, the balance of the Purchases account is transferred to the Merchandise Inventory account.
B)Closing the Revenue accounts is the first step in the closing process.
C)In the closing process, the balance of the owner's drawing account is transferred to the debit side of the owner's capital account.
D)The worksheet is the source of data for the general journal entries required to close the temporary accounts.

Question 42

A reversing entry should not be made for an adjusting entry to record

A)an accrued income item that will involve future cash receipts.
B)depreciation.
C)the accrued salaries.
D)an accrued expense item that will involve future cash payments.

Question 43

Which of the following accounts will appear on the post-closing trial balance?

A)Payroll Tax Expense
B)Sales
C)Capital
D)Depreciation Expense

Question 44

Inventory turnover is calculated by

A)dividing average inventory by cost of goods sold.
B)dividing cost of goods sold by average inventory.
C)dividing average inventory by the ending inventory.
D)adding beginning inventory to ending inventory and dividing by 2.

Question 45

Interest Expense is classified as a(n):

A)Administrative Expense
B)Other Expense
C)Selling Expense
D)Other Income

Question 46

In the general journal, reversing entries are dated as of

A)any time before the end of the fiscal period.
B)the first day of the new fiscal period.
C)any day during the month of the new fiscal period.
D)the last day of the old fiscal period.

Question 47

A company reported gross profit of $72,000, total operating expenses of $41,000 and interest income of $3,600. What is the income from operations?

A)$31,000
B)$27,400
C)$41,000
D)$34,600

Question 48

Which of the following would not be classified as a Current Asset:

A)Cash
B)Accounts Receivable
C)Equipment
D)Supplies

Question 49

Which of the following accounts will NOT appear on the post-closing trial balance?

A)Wages Expense
B)Equipment
C)Wages Payable
D)Prepaid Advertising

Question 50

For the current fiscal year, Purchases were $245,000, Purchase Returns and Allowances were
$8,600, Purchase Discounts were $2,200 and Freight In was $32,000. If the beginning merchandise inventory was $60,000 and the ending merchandise inventory was $75,000, the Cost of Goods Sold is:

A)$251,200
B)$272,800
C)$266,200
D)$281,200

Question 51

The entry to reverse the adjusting entry for accrued payroll taxes expense includes

A)a debit to Employee Income Tax Payable.
B)a credit to Social Security Tax Payable and a credit to Medicare Tax Payable.
C)a debit to Social Security Tax Payable and a debit to Medicare Tax Payable.
D)a debit to Payroll Taxes Expense.

Question 52

Which of the following is not a selling expense:

A)Delivery Expense
B)Rent Expense on the office
C)Sales Salaries Expense
D)Advertising Expense

Question 53

Which of the following is not a section on a Classified Balance Sheet:

A)Plant and Equipment
B)Current Assets
C)Long-Term Liabilities
D)Selling Expenses

Question 54

For the current fiscal year, Purchases were $187,000, Purchase Returns and Allowances were
$4,200 and Freight In was $10,500. If the beginning merchandise inventory was $98,000 and the ending merchandise inventory was $103,000, the Net Delivered Cost of Purchases is:

A)$172,300
B)$193,300
C)$187,000
D)$201,700

Question 55

Which of the following should be classified as a General and Administrative Expense on a Multi-Step Income Statement:

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

Question 56

The entry to reverse the adjustment for accrued interest income consists of a debit to

A)Interest Income and a credit to Income Summary.
B)Interest Income and a credit to Interest Receivable.
C)Interest Receivable and a credit to Interest Income.
D)Interest Income and a credit to Interest Expense.

Question 57

Cost of Goods Sold is classified as a(n):

A)Expense account
B)Asset account
C)Revenue account
D)Owner's Equity account

Question 58

At the end of the year Stan Still Stationery Store had the following balances: Sales $485,000; Sales Discounts $2,540; Sales Returns and Allowances $14,280; Sales Salaries Expense $54,000. The Net Sales for the year are:

A)$414,180
B)$468,180
C)$501,820
D)$447,820

Question 59

The current ratio is calculated by

A)dividing total assets by total liabilities.
B)subtracting current liabilities from current assets.
C)adding current assets to current liabilities.
D)dividing current assets by current liabilities.

Question 60

For the current fiscal year, Purchases were $187,000, Purchase Returns and Allowances were
$4,200 and Freight In was $10,500. If the beginning merchandise inventory was $98,000 and the ending merchandise inventory was $103,000, the Cost of Goods Sold is:

A)$ 167,300
B)$196,700
C)$193,300
D)$188,300

Question 61

For the current fiscal year, Purchases were $680,000, Purchase Returns and Allowances were
$21,640, Purchase Discounts were $5,800 and Freight In was $41,500. If the beginning merchandise inventory was $240,000 and the ending merchandise inventory was $215,000, the Cost of Goods Sold is:

A)$501,060
B)$719,060
C)$636,060
D)$476,060

Question 62

A firm had merchandise inventory of $30,000 on January 1, 2019. During the year the firm had purchases of $54,000, freight in of $1,200, purchases returns and allowances of $2,700, and purchases discounts of $900. The firm had merchandise inventory of $27,000 on December 31, 2019.
1. What net delivered cost of purchases was reported for the year ended December 31, 2019, on the classified income statement?
2. What was the cost of goods sold?

Question 63

The owner of a firm had capital of $78,000 on January 1, 2019, and made withdrawals of $29,000 during 2019. The business earned a net income of $42,000 for the year.
1. What amount of capital was shown as of December 31, 2019, on the statement of owner's equity?
2. How much was the increase or decrease in capital for the year?

Question 64

On the balance sheet, the cost of a fixed asset less its accumulated depreciation to date is the asset's________.

Question 65

Cash, items that will normally be converted to cash, and items that will be used up within one year are called ________ assets.

Question 66

A gross profit percentage of 45 percent means that for every $1 of net sales, gross profit amounts to$________.

Question 67

On a classified balance sheet, Accounts Payable would appear in the________ section.

Question 68

A classified income statement showed net sales of $1,160,000, cost of goods sold of $545,000, and total operating expenses of $416,000 for the fiscal year ended December 31, 2019.
1. What was the gross profit on sales?
2. What was the net income from operations?

Question 69

Each reversing entry is the exact opposite of the related________ entry.

Question 70

The adjusted trial balance data given below is from the Hampton Company's worksheet for the year ended December 31, 2019. The firm had net income of $47,000 for the year. Prepare a statement of owner's equity for the year. No additional investments were made during the period.

Question 71

After the________ entries are posted, the Sales account will have a zero balance.

Question 72

The difference between net sales and the cost of goods sold is called the ________ on sales.

Question 73

The adjusted trial balance data given below is from the Morgan Company's worksheet for the year ended December 31, 2019. Prepare a classified income statement for the year ended December 31, 2019. The expense accounts numbered 611-615 represent selling expenses, and those numbered 621-631 represent general and administrative expenses.

Question 74

The adjusted trial balance data given below is from the Saugatuck Craft's worksheet for the year ended December 31, 2019. The firm had a net loss of $30,000 for the year. Prepare a statement of owner's equity for the year. No additional investments were made during the period.

Question 75

A classified income statement showed net sales of $630,000, cost of goods sold of $342,000, and total operating expenses of $192,000 for the fiscal year ended June 30, 2019.
1. What was the gross profit on sales?
2. What was the net income from operations?

Question 76

The adjusted trial balance data given below is from the Bennett Company's worksheet for the year ended December 31, 2019. The firm had net income of $26,000 for the year. Prepare a statement of owner's equity for the year. No additional investments were made during the period.

Question 77

The owner of a firm had capital of $170,000 on January 1, 2019, and made withdrawals of $96,000 during 2019. The business earned a net income of $90,000 for the year.
1. What amount of capital was shown as of December 31, 2019, on the statement of owner's equity?
2. How much was the increase or decrease in capital for the year?

Question 78

A firm had merchandise inventory of $76,000 on January 1, 2019. During the year the firm had purchases of $102,000, freight in of $1,200, purchases returns and allowances of $4,600, and purchases discounts of $2,000. The firm had merchandise inventory of $62,000 on December 31, 2019.
1. What net delivered cost of purchases was reported for the year ended December 31, 2019, on the classified income statement?
2. What was the cost of goods sold?

Question 79

The adjusting entry was then reversed. To record the first payroll of 2020, which totaled $1,500, Salaries Expense should be debited for $________.

Question 80

All accounts appearing in the ________section of the worksheet are closed to the Income Summary account.