Question 1

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

Accepted Answer

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

Question 2

A reversing entry for the accrued wages adjusting entry will

Accepted Answer

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 3

Merchandise Inventory is a nominal account.

Accepted Answer

A) True 
 B)False

Question 4

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?

Accepted Answer

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

Question 5

Subclassifications of operating expenses are

Accepted Answer

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

Question 6

Reversing entries are optional.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

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 8

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

Accepted Answer

A) True 
 B)False

Question 9

Net purchases is equal to

Accepted Answer

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 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

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

Question 12

The account number 430 would indicate what type of account?

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

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

Accepted Answer

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

Question 15

The profit on merchandise sold before expenses is

Accepted Answer

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

Question 16

What is a weakness of the current ratio?

Accepted Answer

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 17

Match the terms below with the correct definitions.
-Portrays a firm's ability to pay its short-term debts

Accepted Answer

A) Property and equipment 
B) Reversing entries 
C) Gross profit 
D) Current ratio 
E) Working capital
F)Net income or net loss
G)Net sales
H)Income from operations
I)Long-term liabilities
J)Liquidity

Question 18

A net income will result if gross profit is greater than

Accepted Answer

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

Question 19

A reversing entry must be made for each adjusting entry.

Accepted Answer

A) True 
 B)False

Question 20

A net loss will occur if revenues are

Accepted Answer

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

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

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

A reversing entry for the accrued wages adjusting entry will

Merchandise Inventory is a nominal account.

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?

Subclassifications of operating expenses are

Reversing entries are optional.

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

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

Net purchases is equal to

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

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

The account number 430 would indicate what type of account?

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

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

The profit on merchandise sold before expenses is

What is a weakness of the current ratio?

Match the terms below with the correct definitions. -Portrays a firm's ability to pay its short-term debts

A net income will result if gross profit is greater than

A reversing entry must be made for each adjusting entry.

A net loss will occur if revenues are