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Quiz_4.docx - An income statement includes .A)Land andshowing page 1-2 out of 2

1)
An income statement includes
.
A)
Land and Salaries Payable
B)
Owner's Capital and Owner's Withdrawals
C)
Furniture and Cash
D)
Service Revenue and Utilities
Expense Answer: D
Diff: 1
2)
The permanent accounts—assets, liabilities, and stockholders'
equity—are closed to the Owner, Capital account.
Answer: FALSE
Diff: 1
3)
Gross profit is calculated as the difference between net sales revenue
and
.
A)
purchases
B)
cost of goods sold
C)
cost of merchandise inventory
D)
selling and administrative
expenses Answer: B
Diff: 1
4)
A company that uses a perpetual inventory system purchased
inventory on account and later returned goods worth $700 to the
vendor. Which of the following would be the correct journal entry to
record these returns?
A)
Purchase Returns
70
0
Accounts Payable
70
0
B)
Accounts Payable
70
0
Purchase Returns
70
0
C)
Merchandise Inventory
70
0
Accounts Payable
70
0
D)
Accounts Payable
70
0
Merchandise
Inventory
70
0
Answer: D
Diff: 2
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.
The company uses a perpetual inventory system. After two
days, it received defective merchandise worth $4,000. The journal
entry to record the cash receipt for the sale if the payment is received
within 10 days of the invoice date would include
.
A)
a debit to Cash for $20,000, a credit to Merchandise Inventory for
$1,000, and a credit to Sales Revenue for $19,000
B)
a debit to Cash for $19,000, a debit to Sales Discount for $1,000, and
a credit to Accounts Receivable for $20,000
C)
a debit to Cash for $20,000, a debit to Merchandise Inventory for
$4,000, and a credit to Accounts Receivable for $24,000
D)
a debit to Sales Revenue for $24,000, a credit to Accounts Receivable
for
$20,000, and a credit to Sales Discounts for $4,000
Answer: B
Diff: 2
6)
On a multi-step income statement, the operating expenses are
subtracted from
to arrive at operating income.
A)
net sales
B)
cost of goods sold
C)
net profit
D)
gross
profit
Answer: D
Diff: 1
7)
The goal of reporting realistic figures and never overstating
assets or net income applies to the
.
A)
conservatism principle
B)
materiality concept
C)
disclosure principle
D)
consistency
principle Answer: A
Diff: 1