Question 1

The following information was taken from the financial statements of Ashley's Linens: Total current assets
$ 53,000
Property, plant, and equipment
6,000
Current liabilities
21,000
Long-term liabilities
4,000
Owner's equity
34,000
Beginning inventory
31,000
Ending inventory
33,000
Cost of goods sold
152,000
Net income
42,000
​
The working capital of Ashley's Linens is

Accepted Answer

Working capital is calculated as total current assets minus current liabilities. Therefore, $53,000 (current assets) - $21,000 (current liabilities) = $32,000.

Question 2

Closing entries are made in the

Accepted Answer

Closing entries are made in the general journal at the end of the accounting period to transfer the balances of temporary accounts (revenue, expense, and dividend accounts) to the retained earnings account.

Question 3

The following information was taken from the financial statements of Brandon's Motor Shop: Total current assets
$ 53,000
Property, plant, and equipment
6,000
Current liabilities
21,000
Long-term liabilities
4,000
Owner's equity
34,000
Beginning inventory
31,000
Ending inventory
33,000
Cost of goods sold
152,000
Net income
42,000
​
The current ratio for Brandon's Motor Shop is closest to

Accepted Answer

The current ratio is calculated by dividing total current assets by total current liabilities. Using the information provided, we can calculate the current ratio as follows:

Current ratio = Total current assets / Current liabilities
Current ratio = $53,000 / $21,000
Current ratio = 2.5 to 1

Therefore, the closest answer choice is C) 2.5 to 1.

Question 4

The information needed in journalizing the closing entries is obtained from the

Accepted Answer

The information needed for journalizing the closing entries is obtained from the work sheet. The work sheet summarizes the adjusting entries and provides the necessary information to close the temporary accounts.

Question 5

Assets that are used for several years in the operation of a business are called

Accepted Answer

Property, plant, and equipment are assets that are used for several years in the operation of a business. Marketable securities, current assets, and investments are not necessarily used for several years in a business operation.

Question 6

Information needed in journalizing the first three closing entries is obtained from which of the following work sheet columns?

Accepted Answer

The first three closing entries involve closing revenue and expense accounts, which are found in the Income Statement columns of the worksheet.

Question 7

Which of the following accounts is used only at the close of the accounting period to adjust the merchandise inventory account and summarize the temporary owner's equity accounts?

Accepted Answer

The Income Summary account is used only at the close of the accounting period to adjust the merchandise inventory account and summarize the temporary owner's equity accounts. Option A, Owner's Capital, is a permanent account that reflects the owner's investment in the business. Option C, Cost of Goods Sold, is an expense account that is adjusted throughout the accounting period and not just at the close of the period. Option D, Sales, is a revenue account that is also adjusted throughout the accounting period and not just at the close of the period.

Question 8

Accumulated depreciation amounts are shown as deductions from the

Accepted Answer

Accumulated depreciation is a contra asset account that is used to offset the balance of a related asset account such as buildings and equipment. Therefore, it is shown as a deduction from the cost of those accounts.

Question 9

The entries that transfer the balances of the temporary owner's equity accounts to the permanent owner's equity account are called

Accepted Answer

Closing entries transfer the balances of temporary owner's equity accounts (such as revenue and expense accounts) to the permanent owner's equity account at the end of an accounting period. This process resets the temporary accounts to zero to start a new period. Adjusting entries are made during the accounting period to update accounts for items such as accrued expenses or depreciation. Reversing entries are made at the beginning of a new accounting period to cancel out adjusting entries made in the previous period. General journal entries can refer to any entry made in the general journal, which records transactions that are not recorded in a special journal.

Question 10

Cash and all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of the business are classified as

Accepted Answer

Cash and all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of the business are classified as current assets. Temporary investments and marketable securities could be classified as current assets, but not necessarily, as they may have a longer maturity date. Investments, on the other hand, includes long-term assets such as stocks or real estate.

Question 11

The rough "rule of thumb" for a quick ratio is that the ratio should be about

Accepted Answer

The quick ratio, also known as the acid test ratio, measures a company's ability to pay off its current liabilities with its most liquid assets. A quick ratio of 1 to 1 means that a company has enough liquid assets to cover its current liabilities, which is generally considered to be a reasonable benchmark. A ratio of 2 to 1 would be even better, but it's not always achievable or necessary for all companies. Ratios of .1 to 1 or 1 to .1 would indicate serious liquidity problems or excessive levels of working capital.

Question 12

A formal statement of the assets, liabilities, and owner's equity of a business at a specified date is known as a(n)

Accepted Answer

A balance sheet is a statement that provides a summary of the assets, liabilities, and equity of a business at a specific point in time. It helps stakeholders to assess a company's financial position and determine whether it has sufficient resources to meet its obligations. The income statement, on the other hand, provides a summary of a company's revenues and expenses over a period of time, while the statement of owner's equity presents changes in the owner's equity during the same period. The statement of cash flows provides information about the cash inflows and outflows of a business during a specific period.

Question 13

Net sales minus cost of goods sold equals

Accepted Answer

Net sales minus cost of goods sold gives us the gross profit, which is the profit earned before deducting any operating expenses or other expenses. Therefore, the correct answer is D.

Question 14

The following information was taken from the financial statements of Sunshine City: Total current assets
$ 53,000
Property, plant, and equipment
6,000
Current liabilities
21,000
Long-term liabilities
4,000
Owner's equity
34,000
Beginning inventory
31,000
Ending inventory
33,000
Cost of goods sold
152,000
Net income
42,000
​
The inventory turnover (rounded to one decimal place) for Sunshine City is

Accepted Answer

Inventory turnover is calculated as cost of goods sold divided by average inventory. The average inventory is calculated by adding beginning and ending inventory and dividing by 2. Therefore, the average inventory is ($31,000 + $33,000)/2 = $32,000. The cost of goods sold is given as $152,000. Therefore, the inventory turnover is $152,000/$32,000 = 4.75 or 4.8 times (rounded to one decimal place). The closest option is C.

Question 15

The ability of a business to meet its current obligations may be determined by the

Accepted Answer

The current ratio is a measure of a company's ability to pay its current debts using its current assets. A higher current ratio indicates a better ability to meet short-term obligations.

Question 16

In a multiple-step income statement, operating expenses are subtracted from gross profit to compute

Accepted Answer

Operating expenses are subtracted from gross profit to calculate income from operations, which is the amount earned from the company's primary business activities. This is the next step in the multiple-step income statement after calculating gross profit. Net income is calculated by subtracting non-operating expenses and taxes from income from operations. Other income refers to revenue earned from non-primary business activities, and net loss occurs when expenses exceed revenue.

Question 17

The following information was taken from the financial statements of Collin's Inn: Total current assets
$162,000
Average owner's equity
148,000
Beginning inventory
32,000
Ending inventory
36,000
Cost of goods sold
165,000
Net income
37,000
​
The return on owner's equity for Collin's Inn is

Accepted Answer

Return on owner's equity is calculated as (Net Income / Average Owner's Equity) * 100. For Collin's Inn, it is (37,000 / 148,000) * 100 = 25%.

Question 18

After the temporary owner's equity and drawing accounts are transferred to the permanent owner's equity account, which of the following accounts will have a balance?

Accepted Answer

Owner's Capital is the only account that will have a balance after the temporary owner's equity and drawing accounts are transferred to the permanent owner's equity account.

Question 19

The third step in the closing process is to transfer the balance in which of the following accounts to the permanent owner's equity account?

Accepted Answer

The balance in the Income Summary account is transferred to the permanent Owner's Equity account as part of the closing process. This account serves as a temporary holding account for all revenues and expenses during the accounting period, and its balance should be zero at the end of the closing process.

Question 20

Those obligations that are due within one year or the normal operating cycle of the business and will be paid with money provided by the current assets are called

Accepted Answer

Current liabilities are the obligations of a company that are expected to be paid off within a year or within the normal operating cycle of the business, whichever is longer. These are typically short-term debts that are paid using the current assets of the company, such as cash or inventory. Investments and marketable securities are not liabilities, and long-term liabilities are debts that are due after one year or the normal operating cycle of the business.

Quiz 15: Financial Statements and Year-End Accounting for a Merchandising Business

Closing entries are made in the

The information needed in journalizing the closing entries is obtained from the

Assets that are used for several years in the operation of a business are called

Information needed in journalizing the first three closing entries is obtained from which of the following work sheet columns?

Which of the following accounts is used only at the close of the accounting period to adjust the merchandise inventory account and summarize the temporary owner's equity accounts?

Accumulated depreciation amounts are shown as deductions from the

The entries that transfer the balances of the temporary owner's equity accounts to the permanent owner's equity account are called

Cash and all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of the business are classified as

The rough "rule of thumb" for a quick ratio is that the ratio should be about

A formal statement of the assets, liabilities, and owner's equity of a business at a specified date is known as a(n)

Net sales minus cost of goods sold equals

The ability of a business to meet its current obligations may be determined by the

In a multiple-step income statement, operating expenses are subtracted from gross profit to compute

The following information was taken from the financial statements of Collin's Inn: Total current assets $162,000 Average owner's equity 148,000 Beginning inventory 32,000 Ending inventory 36,000 Cost of goods sold 165,000 Net income 37,000 The return on owner's equity for Collin's Inn is

After the temporary owner's equity and drawing accounts are transferred to the permanent owner's equity account, which of the following accounts will have a balance?

The third step in the closing process is to transfer the balance in which of the following accounts to the permanent owner's equity account?

Those obligations that are due within one year or the normal operating cycle of the business and will be paid with money provided by the current assets are called

Quiz 15: Financial Statements and Year-End Accounting for a Merchandising Business

Closing entries are made in the

The information needed in journalizing the closing entries is obtained from the

Assets that are used for several years in the operation of a business are called

Information needed in journalizing the first three closing entries is obtained from which of the following work sheet columns?

Which of the following accounts is used only at the close of the accounting period to adjust the merchandise inventory account and summarize the temporary owner's equity accounts?

Accumulated depreciation amounts are shown as deductions from the

The entries that transfer the balances of the temporary owner's equity accounts to the permanent owner's equity account are called

Cash and all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of the business are classified as

The rough "rule of thumb" for a quick ratio is that the ratio should be about

A formal statement of the assets, liabilities, and owner's equity of a business at a specified date is known as a(n)

Net sales minus cost of goods sold equals

The ability of a business to meet its current obligations may be determined by the

In a multiple-step income statement, operating expenses are subtracted from gross profit to compute

The following information was taken from the financial statements of Collin's Inn: Total current assets $162,000 Average owner's equity 148,000 Beginning inventory 32,000 Ending inventory 36,000 Cost of goods sold 165,000 Net income 37,000 ​ The return on owner's equity for Collin's Inn is

After the temporary owner's equity and drawing accounts are transferred to the permanent owner's equity account, which of the following accounts will have a balance?

The third step in the closing process is to transfer the balance in which of the following accounts to the permanent owner's equity account?

Those obligations that are due within one year or the normal operating cycle of the business and will be paid with money provided by the current assets are called

The following information was taken from the financial statements of Collin's Inn: Total current assets $162,000 Average owner's equity 148,000 Beginning inventory 32,000 Ending inventory 36,000 Cost of goods sold 165,000 Net income 37,000 The return on owner's equity for Collin's Inn is