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Exam 13: Financial Statements and Closing Procedures

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Question 41

Multiple Choice

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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.

E) None of the above
F) A) and C)

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Question 42

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Match the description with the accounting terms.

Premises

Responses

A type of income statement where only one computation is needed to determine the net income (total revenue — total expenses = net income)

Classified financial statement

The difference between net sales and the cost of goods sold

Current assets

A format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group

Current liabilities

A type of income statement on which several subtotals are computed before the net income is calculated

Current ratio

The amount of gross profit from each dollar of sales

Gross profit

The number of times inventory is purchased and sold during the accounting period

Gross profit percentage

The ease with which an item can be converted into cash

Inventory turnover

Property that will be used in the business for longer than one year

Liquidity

Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period

Long-term liabilities

A relationship between current assets and current liabilities that provides a measure of a firm's ability to pay its current debts

Multiple-step income statement

Assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year

Plant and equipment

Debts of a business that are due more than one year in the future

Reversing entries

Debts that must be paid within one year

Single-step income statement

Premises

A type of income statement where only one computation is needed to determine the net income (total revenue — total expenses = net income)

The difference between net sales and the cost of goods sold

A format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group

A type of income statement on which several subtotals are computed before the net income is calculated

The amount of gross profit from each dollar of sales

The number of times inventory is purchased and sold during the accounting period

The ease with which an item can be converted into cash

Property that will be used in the business for longer than one year

Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period

A relationship between current assets and current liabilities that provides a measure of a firm's ability to pay its current debts

Assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year

Debts of a business that are due more than one year in the future

Debts that must be paid within one year

Responses

Classified financial statement

Current assets

Current liabilities

Current ratio

Gross profit

Gross profit percentage

Inventory turnover

Liquidity

Long-term liabilities

Multiple-step income statement

Plant and equipment

Reversing entries

Single-step income statement

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Correct Answer

Premises

Responses

A type of income statement where only one computation is needed to determine the net income (total revenue — total expenses = net income)

The difference between net sales and the cost of goods sold

A format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group

A type of income statement on which several subtotals are computed before the net income is calculated

The amount of gross profit from each dollar of sales

The number of times inventory is purchased and sold during the accounting period

The ease with which an item can be converted into cash

Property that will be used in the business for longer than one year

Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period

A relationship between current assets and current liabilities that provides a measure of a firm's ability to pay its current debts

Assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year

Debts of a business that are due more than one year in the future

Debts that must be paid within one year

Premises

A type of income statement where only one computation is needed to determine the net income (total revenue — total expenses = net income)

The difference between net sales and the cost of goods sold

A format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group

A type of income statement on which several subtotals are computed before the net income is calculated

The amount of gross profit from each dollar of sales

The number of times inventory is purchased and sold during the accounting period

The ease with which an item can be converted into cash

Property that will be used in the business for longer than one year

Journal entries made to reverse the effect of certain adjusting entries involving accrued income or accrued expenses to avoid problems in recording future payments or receipts of cash in a new accounting period

A relationship between current assets and current liabilities that provides a measure of a firm's ability to pay its current debts

Assets consisting of cash, items that normally will be converted into cash within one year, or items that will be used up within one year

Debts of a business that are due more than one year in the future

Debts that must be paid within one year

Responses

Question 43

Multiple Choice

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

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

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.

On December 31, 2019, 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.

The data below concerns adjustments to be made at the Conner Company. Record the adjusting entries on page 12 of a general journal as of December 31, 2019. On the same page of the general journal, record the reversing entries as of January 1, 2020. Include descriptions. Adjustment data: a)On October 1, 2019, the firm paid rent of $6,000 in advance for a 6-month period. b)A total of $5,000 should be recorded as depreciation of equipment for 2019. c)On December 31, 2019, the firm owed salaries of $4,000 that will not be paid until January 2020. d)On December 31, 2019, the firm owed the employer's social security (6.2%)and Medicare (1.45%)taxes on all of the accrued salaries.

Which of the following is not a selling expense:

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

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.

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

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?

Match the accounting terms with the description

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:

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:

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

The data below concerns adjustments to be made at the Tyson Company. Record the adjusting entries on page 12 of a general journal as of December 31, 2019. On the same page of the general journal, record the reversing entries as of January 1, 2020. Include descriptions. Adjustment data: (a)On October 1, 2019, the firm paid rent of $20,000 in advance for a 6-month period. (b)A total of $13,000 should be recorded as depreciation of equipment for 2019. (c)On December 31, 2019, the firm owed salaries of $12,000 that will not be paid until January 2020. (d)On December 31, 2019, the firm owed the employer's social security (6.2%) and Medicare (1.45%) taxes on all of the accrued salaries.

Gross profit on sales is calculated as

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

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?