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

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Question 21

Multiple Choice

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Assuming Net Sales is $180,000, Cost of Goods Sold is $79,000, Selling Expenses are $28,500, General Expenses are $22,800, and Interest Expense is $2,000, then Income from Operations is

A) $27,700.
B) $49,700.
C) $101,000.
D) $95,300.
E) $72,500.

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Question 22

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Match the terms below with the correct definitions. -Excess of gross profit over operating expenses

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

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Question 23

Multiple Choice

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Examples of current assets are

Which of the following are NOT examples of General Expenses?

On the income statement, adding delivered cost of purchases to beginning merchandise inventory results in

Which of the following are nominal accounts?

The ability of an asset to be quickly turned into cash

In the closing process, the Sales Returns and Allowances account is credited.

Which statement is NOT true about the Chart of Accounts?

Match the terms below with the correct definitions. -Excess of net sales over the cost of goods sold

Identify each of the following items relating to sections of a balance sheet as Current Assets (CA), Property and Equipment (PE), Current Liabilities (CL), Long-Term Liabilities (LTL), or Owner's Equity (OE). ​ ____Unearned Fees ____Supplies ____Building ____Mortgage Payable (due in 5 years) ____Wages Payable ____Accounts Receivable ____Land ____Frepaid Insurance ____Current portion Mortgage Payable ____P. Adams, Capital

The calculation of the cost of goods available for sale is not affected by the amount of the ending merchandise inventory.

Liquidity is the ability to pay all current liabilities in one year.

Which of the following statements is true?

Selected account balances of Rich and Company as of December 31, the end of its fiscal year, are listed below in alphabetical order. Instructions: Based on the account balances above, prepare a classified balance sheet. $\begin{array} { l r } \text { Accounts Payable } & 36,510 \\\text { Accounts Receivable } & 32,633 \\\text { Accumulated Depreciation, Building } & 39,350 \\\text { Accumulated Depreciation, Equipment } & 23,030 \\\text { Building } & 66,970 \\\text { Cash } & 28,705 \\\text { Equipment } & 36,720 \\\text { Land } & 13,580 \\\text { Merchandise Inventory } & 58,823 \\\text { Mortgage Payable } & 30,613 \\\text { Mortgage Payable (current portion) } & 4,100 \\\text { Notes Payable } & 5,200 \\\text { Notes Receivable } & 4,023 \\\text { Frepaid Insurance } & 3,113 \\\text { S. Rich, Capital } & 105,049 \\\text { Supplies } & 2,585 \\\text { Unearned Rent Income } & 1,000 \\\text { Wages Payable } & 2,300\end{array}$

Accounts whose balances apply to one fiscal period only are called permanent accounts.

Match the terms below with the correct definitions. -The firm's excess of its current assets over its current liabilities

Net Sales is Sales minus Sales Returns and Allowances plus Sales Discounts.

Garcia Company has the following information as of December 31, the end of its fiscal year: Instructions: Using the information presented above, prepare the Cost of Goods Sold section of the income statement. $\begin{array}{lr}\text { Purchases discounts } & 5,700 \\\text { Merchandise inventory, December } 31 & 1,57,300 \\\text { Purchases } & 51,300 \\\text { Merchandise inventory, January 1 } & 1,65,160 \\\text { Purchases returns and allowances } & 6,540 \\\text { Freight in } & 20,650 \\\text { Freight out } & 8,250\end{array}$ ​

Purchases differ from delivered cost of purchases by the amount of