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Exam 13: Financial Statements and Closing Procedures

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Question 41

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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.

E) A) and B)
F) B) and D)

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Question 42

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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.

A) True
B) False

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Question 43

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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, 2013. On the same page of the general journal, record the reversing entries as of January 1, 2014. Include descriptions. Adjustment data: (a) On October 1, 2013, 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 2013. (c) On December 31, 2013, the firm owed salaries of $4,000 that will not be paid until January 2014. (d) On December 31, 2013, the firm owed the employer's social security (6.2%) and Medicare (1.45%) taxes on all of the accrued salaries.

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:

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. $\begin{array} { | l | l | r | r | } \hline { \text { ADJUSTED TRIAL BALANCE } } \\\hline \begin{array} { c } \text { ACCT. } \\\text { NO. }\end{array} & { \text { ACCOUNT NAME } } & \text { DEBIT } & \text { CREDIT } \\\hline 399 & \text { Income Summary } & 62,000 & 57,000 \\\hline 401 & \text { Sales } & & 250,000 \\\hline 451 & \text { Sales Returns and Allowances } & 4,500 & \\\hline 491 & \text { Interest Income } & & 750 \\\hline 501 & \text { Purchases } & 125,000 & \\\hline 502 & \text { Freight In } & 3,000 & \\\hline 503 & \text { Purchases Returns and Allowances } & & 1,600 \\\hline 504 & \text { Purchases Discounts } & & 1,900 \\\hline 611 & \text { Sales Salaries Expense } & 59,000 & \\\hline 613 & \text { Advertising Expense } & 2,100 & \\\hline 615 & \text { Travel Expense } & 11,500 & \\\hline 621 & \text { Office Salaries Expense } & 18,300 & \\\hline 623 & \text { Office Supplies Expense } & 750 & \\\hline 625 & \text { Utilities Expense } & 4,500 & \\\hline 627 & \text { Payroll Taxes Expense } & 1,500 & \\\hline 629 & \text { Uncollectible Accounts Expense } & 1,350 & \\\hline 631 & \text { Depreciation Expense - Office Equipment } & 550 & \\\hline 691 & \text { Interest Expense } & 1,600 & \\\hline\end{array}$

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

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. $\begin{array}{l}\text { ADJUSTED TRIAL BALANCE }\\\begin{array} { | l | r | r | } \hline { \text { ACCOUNT NAME } } & \text { DEBIT } & { \text { CREDIT } } \\\hline \text { Sally Saugatuck, Capital } & & 52,000 \\\hline \text { Sally Saugatuck, Drawing } & 3,000 & \\\hline\end{array}\end{array}$

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.

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

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.

Which of the following accounts is not closed?

Interest Expense is classified as a(n) :

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.

Which of the following is not a selling expense?

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. $\begin{array} { | l | r | r | } \hline { \text { INCOME STATEMENT COLUMNS } } \\\hline \text { ACCOUNT NAME } & \text { DEBIT } & \text { CREDIT } \\\hline \text { Income Summary } & 47,000 & 53,000 \\\hline \text { Sales } & & 170,000 \\\hline \text { Sales Returns and Allowances } & 4,500 & \\\hline \text { Interest Income } & & 600 \\\hline \text { Purchases } & 71,000 & \\\hline \text { Freight In } & 2,300 & \\\hline \text { Purchases Returns and Allowances } & & 1,300 \\\hline \text { Purchases Discounts } & & 1,900 \\\hline \text { Sales Salaries Expense } & 37,000 & \\\hline \text { Office Salaries Expense } & 18,500 & \\\hline \text { Office Supplies Expense } & 700 & \\\hline \text { Utilities Expense } & 3,500 & \\\hline \text { Payroll Taxes Expense } & 1,100 & \\\hline \text { Uncollectible Accounts Expense } & 1,200 & \\\hline \text { Depr. Expense - Office Equipment } & 600 & \\\hline \text { Totals } & 187,400 & 226,800 \\\hline \text { Net Income } & \underline { 39,400 } & \\\hline & \underline { 226,800 } & \underline { \underline { 226,800 } } \\\hline\end{array}$

Prepaid expenses appear in the

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

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

In the general journal, reversing entries are dated as of

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