Deck 13: Financial Statements and Closing Procedures

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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 7

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 8

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

Question 9

Adjusting entries in the general journal do not require detailed explanations since the information about the entries is listed on the worksheet.

Question 10

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

Question 11

When several subtotals and totals are computed before the net income is presented, the income statement is referred to as a ____________________ income statement.

Question 12

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

Question 13

The Income Summary credit amount appearing in the Income Statement section of the worksheet is included in the combined entry to close the revenue and other accounts with credit balances.

Question 14

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

Question 15

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

Question 16

If a firm experiences a net loss, this amount is placed in parentheses on the income statement.

Question 17

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

Question 18

A net loss for the period and withdrawals by the owner cause a ____________________ in capital.

Question 19

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

Question 20

When prepaid expense items are initially recorded as assets, the end-of-period adjustments for these items should be reversed.

Question 21

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

Question 22

Prepaid expenses appear in the

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

Question 23

Gross profit on sales is calculated by subtracting

A) sales returns and allowances from sales.
B) cost of goods sold from net sales.
C) ending inventory from the total merchandise available for sale.
D) total expenses from sales.

Question 24

Which of the following statements is not correct?

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

Question 25

If ____________________ entries are recorded, there is no need to examine each transaction in the new fiscal period to see whether a portion applies to a past period and then divide the amount of the transaction between the two periods.

Question 26

The ____________________ of a building is the portion of the original cost that has not yet been depreciated.

Question 27

Each balance appearing in the ____________________ section of the worksheet is closed into the Income Summary account.

Question 28

The beginning capital balance shown on a statement of owner's equity is $43,000. Net income for the period is $18,000. The owner withdrew $22,000 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) $39,000.
B) $47,000.
C) $61,000.
D) $83,000.

Question 29

An adjusting entry was made for accrued salaries of $600 at the end of 2013. The adjusting entry was then reversed. To record the first payroll of 2014, which totaled $1,500, Salaries Expense should be debited for ____________________.

Question 30

The beginning capital balance shown on a statement of owner's equity is $86,000. Net income for the period is $36,000. The owner withdrew $44,000 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) $78,000.
B) $94,000.
C) $122,000.
D) $166,000.

Question 31

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

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

Question 32

The beginning capital balance shown on a statement of owner's equity is $100,000. Net income for the period is $50,000. The owner withdrew $25,000 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) $175,000.
B) $150,000.
C) $125,000.
D) $100,000.

Question 33

The inventory ____________________ represents the time period it takes from the purchase of the inventory until it is sold.

Question 34

The balance sheet is arranged in a ____________________ format if assets and liabilities are divided into groups of similar accounts and a subtotal is given for each group.

Question 35

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

Question 36

Which of the following statements is correct?

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

Question 37

The balance of the owner's drawing account is

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

Question 38

Which of the following is not a current asset?

A) Accounts Receivable
B) Prepaid Insurance
C) Merchandise Inventory
D) Equipment

Question 39

The entry to reverse an adjustment for accrued interest expense includes a debit to ____________________.

Question 40

Each reversing entry is the exact opposite of the related ____________________ entry.

Question 41

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

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

Question 42

The current ratio is calculated by

A) dividing current assets by current liabilities.
B) dividing current liabilities by current assets.
C) dividing total assets by total current assets.
D) dividing current assets by total assets.

Question 43

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

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

Question 44

Which of the following is not a selling expense?

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

Question 45

Which of the following statements is not correct?

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

Question 46

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

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

Question 47

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

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

Question 48

In the general journal, reversing entries are dated as of

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

Question 49

Which of the following accounts will appear on the postclosing trial balance?

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

Question 50

Which of the following accounts is not closed?

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

Question 51

Inventory turnover is calculated by

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

Question 52

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 Income and a credit to Interest Expense.
D) Interest Receivable and a credit to Interest Income.

Question 53

Which of the following accounts is not closed?

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

Question 54

For the current fiscal year, Purchases were $166,000, Purchase Returns and Allowances were $3,000 and Freight In was $12,000. If the beginning merchandise inventory was $110,000 and the ending merchandise inventory was $75,000, the Cost of Goods Sold is:

A) $186,000
B) $116,000
C) $210,000
D) $216,000

Question 55

Which of the following accounts is not closed?

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

Question 56

Which of the following accounts will appear on the postclosing trial balance?

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

Question 57

A company reported gross profit of $85,000, total operating expenses of $40,000 and interest income of $2,500. What is the income from operations?

A) $47,500
B) $42,500
C) $40,000
D) $45,000

Question 58

Interest Expense is classified as a(n):

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

Question 59

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

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

Question 60

Which of the following accounts is not closed?

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

Question 61

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) Insurance Expense
D) Advertising Expense

Question 62

Teresa Davis is the owner of a convenience shop. The firm had a net income of $4,500 for the year. What accounts are debited and credited to transfer the net loss to the owner's capital account during the closing process?

Question 63

At the end of the year Stan Still Stationery Store had the following balances: Sales $580,000; Sales Discounts $2,540; Sales Returns and Allowances $14,280; Sales Salaries Expense $60,000. The Net Sales for the year are:

A) $565,720
B) $577,460
C) $563,180
D) $503,180

Question 64

The adjusted trial balance data given below is from the Bennett Company's worksheet for the year ended December 31, 2013. The firm had net income of $100,000 for the year. Prepare a statement of owner's equity for the year. No additional investments were made during the period.

Question 65

Jeannine Coulson is the owner of a book store. During the year she made withdrawals of cash totaling $9,000. What accounts are debited and credited to close the owner's drawing account?

Question 66

On December 31, 2013, the Income Statement section of the worksheet is shown below. The balance of Ally Logan's drawing account is $16,000. Record the necessary closing entries on page 9 of a general journal.

Question 67

The adjusted trial balance data given below is from the Hampton Company's worksheet for the year ended December 31, 2014. The firm had net income of $38,000 for the year. Prepare a statement of owner's equity for the year. No additional investments were made during the period.

Question 68

A classified income statement showed net sales of $435,000, cost of goods sold of $188,000, and total operating expenses of $165,000 for the fiscal year ended June 30, 2013.
1. What was the gross profit on sales?
2. What was the net income from operations?

Question 69

The owner of a firm had capital of $85,000 on January 1, 2013, and made withdrawals of $33,000 during 2013. The business earned a net income of $45,000 for the year.
1. What amount of capital was shown as of December 31, 2013, on the statement of owner's equity?
2. How much was the increase or decrease in capital for the year?

Question 70

The adjusted trial balance data given below is from the Morgan Company's worksheet for the year ended December 31, 2014. Prepare a classified income statement for the year ended December 31, 2014. The expense accounts numbered 611-615 represent selling expenses, and those numbered 621-631 represent general and administrative expenses.

Question 71

A firm had merchandise inventory of $30,000 on January 1, 2013, and had purchases of $45,000, freight in of $600, purchases returns and allowances of $2,300, and purchases discounts of $1,000 during 2013. The firm had merchandise inventory of $27,000 on December 31, 2013.
1. What net delivered cost of purchases was shown for the year ended December 31, 2013, on the classified income statement?
2. What was the cost of goods sold?

Question 72

Brianna Graham is the owner of a dress shop. The firm had a net loss of $9,000 for the year. What accounts are debited and credited to transfer the net loss to the owner's capital account during the closing process?

Question 73

Cost of Goods Sold is classified as a(n)

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

Question 74

The adjusted trial balance data given below is from the Saugatuck Craft's worksheet for the year ended December 31, 2013. 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

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

Question 76

The owner of a firm had capital of $170,000 on January 1, 2014, and made withdrawals of $66,000 during 2014. The business earned a net income of $90,000 for the year.
1. What amount of capital was shown as of December 31, 2014, on the statement of owner's equity?
2. How much was the increase or decrease in capital for the year?

Question 77

The adjusted trial balance data given below is from Cameron White Company's worksheet for the year ended December 31, 2013. The balance of the Notes Payable account consists of notes that are due within a year. The mortgage extends for more than a year. Prepare a classified balance sheet as of December 31, 2013. The ending capital for the period from the statement of owner's equity is $56,150.

Question 78

A classified income statement showed net sales of $870,000, cost of goods sold of $376,000, and total operating expenses of $330,000 for the fiscal year ended December 31, 2013.
1. What was the gross profit on sales?
2. What was the net income from operations?

Question 79

A firm had merchandise inventory of $60,000 on January 1, 2014, and had purchases of $90,000, freight in of $1,200, purchases returns and allowances of $4,600, and purchases discounts of $2,000 during 2014. The firm had merchandise inventory of $54,000 on December 31, 2014.
1. What net delivered cost of purchases was shown for the year ended December 31, 2014, on the classified income statement?
2. What was the cost of goods sold?

Question 80

Allyse Petry is the owner of a boutique. During the year she made withdrawals of cash totaling $25,000. What accounts are debited and credited to close the owner's drawing account?