Download Chapter 16, TEST 16B

Chapter 16, TEST 16B
Name
Date
_________________________
_________________________
SCORING RECORD
Section
Total
Possible
A
B
C
D
Total
30
30
10
30
100
Deductions
Section A
DIRECTIONS: Each of the following statements is true or false. Indicate your
choice by writing in the Answers column T for a true answer or F for a false
answer. (2 points for each correct answer)
For
Answers
Scoring
1. An income statement shows the sources of revenue,
types of expenses, and the amount of the net income
or net loss for the period.
_____
_____
2. The multiple-step form of income statement lists
all revenue items and their total, followed by all
expense items and their total, to produce a
difference that is either net income or net loss.
_____
_____
3. Gross sales plus sales returns and allowances is
called net sales.
_____
_____
4. Gross profit less operating expenses produces the
income from operations.
_____
_____
5. A formal statement of the changes in owner's equity
during an accounting period is called a statement
of owner's equity.
_____
_____
6. Current assets include cash and all other assets
that may be reasonably expected to be converted
into cash or consumed within one year or the normal
operating cycle of the business, whichever is longer.
_____
_____
7. Liquidity refers to the speed at which a business can
convert their assets to cash.
_____
_____
8. Current liabilities are those obligations that are
due within one year or the normal operating cycle
of the business, whichever is longer, and will
require use of current assets.
_____
_____
9. Salvage value and accumulated depreciation are
subtracted from the cost of an asset to calculate
book value.
_____
_____
10. The current ratio is computed adding current
assets and current liabilities.
_____
_____
11. The quick ratio is determined by subtracting
current liabilities from current assets.
_____
_____
12. Interstatement analysis provides a comparison of
the relationships between income statement and
balance sheet amounts.
_____
_____
13. If inventory is taken only at the end of each
accounting period, the average inventory for the
period can be calculated by adding the beginning
and ending inventories.
_____
_____
14. Closing entries for a merchandising business do
not resemble closing entries for a service business.
_____
_____
15. Reversing entries simplify entering transactions
in the succeeding accounting period.
_____
_____
Student
Score
16-2
Section B
Directions: Complete each of the following statements by writing in the
Answers column the letter of the word or words that correctly completes each
statement. (3 points each)
For
Answers
Scoring
1.
2.
3.
4.
5.
6.
7.
8.
A formal statement of the results of the operation
of a business during an accounting period is
called a(n): (A) income statement; (B) balance
sheet; (C) statement of condition; (D) statement
of equities; (E) trial balance.
_____
_____
The capital account is: (A) increased by additional
investments; (B) decreased by withdrawals;
(C) increased by net income for the accounting
period; (D) decreased by a net loss for the
accounting period; (E) increased by withdrawals.
_____
_____
A formal statement of the assets, liabilities,
and owner's equity of a business at a specified
date is known as the: (A)income statement;
(B) balance sheet; (C) owner's equity statement;
(D) statement of profits and losses; (E) a and d.
_____
_____
Assets that are used for several years in the
operation of a business are called; (A) temporary
investments; (B) marketable securities; (C) current
assets; (D) investments; (E) property, plant,
and equipment assets.
_____
_____
The following information was taken from the
financial statement of Hocking Valley Auto Supply:
Total current assets
96,000
Property, plant and equipment
10,000
Current liabilities
24,000
Long-term liabilities
6,000
Owner's equity
76,000
Beginning inventory
60,000
Ending inventory
64,000
Cost of goods sold
300,000
Net income
80,000
The current ratio for Hocking Valley Auto Supply
is: (A) 1.3 to 1; (B) 3.5 to 1; (C) 4 to 1;
(D) $36,000; (E) $96,000.
_____
_____
The following information was taken from the
financial statement of Hocking Valley Auto Supply:
Total current assets
82,000
Property, plant and equipment
10,000
Current liabilities
24,000
Long-term liabilities
6,000
Owner's equity
76,000
Beginning inventory
58,000
Ending inventory
66,000
Cost of goods sold
310,000
Net income
80,000
The inventory turnover (rounded to one decimal
place) for Hocking Valley Auto Supply is: (A) 2.2;
(B) 3.0; (C) 4.8; (D) 5.0; (E) 5.5.
_____
_____
Which of the following is not considered a general
expense: (A) Utilities Expense; (B) Rent Expense;
(C) Telephone Expense; (D) Office Supplies Expense;
(E) Sales Salaries Expense.
_____
_____
After the temporary owner's equity and drawing
accounts are transferred to the permanent owner's
equity account, only the following account(s) will
have balances: (A) assets; (B) liability;
(C) capital; (D) all of these; (E) none of these.
_____
_____
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9.
Cash and all other current assets that can be converted
into cash quickly, such as accounts receivable and temporary
investment are referred to as: (A) quick assets; (B) current
assets; (C) liquidity; (D) long-term assets;
(E) property, plant and equipment.
_____
10. The following entries simplify the proper
separation of revenues and expenses between
successive accounting periods: (A) adjusting;
(B) closing; (C) reversing; (D) general journal;
(E) purchasing.
_____
_____
_____
Section C
DIRECTIONS: Indicate the proper category for the following accounts.
CA = current asset CL = current liability N = neither (1 point each)
Prepaid Insurance
Accounts Payable
Merchandise Inventory
Unearned Revenue
Computer Equipment
______
______
______
______
______
Cash
______
Accounts Receivable
______
Notes Payable(due in 3 yrs)______
Land
______
Supplies
______
Section D
DIRECTIONS: The following Income Statement and Balance Sheet columns are from
the work sheet of Rebecca’s Rainbow of Shirts for the year ended June 30, 20--.
Prepare a multi-step income statement for Rebecca’s Rainbow of Shirts for the
current fiscal year. (30 points total.)
Rebecca's Rainbow of Shirts
Partial Workshet
For the year ended June 30, 20-Income Statement
Debit
Credit
Cash
Accounts Receivable
Merchandise Inventory
Store Supplies
Office Supplies
Prepaid Insurance
Store Equipment
Accum. Dep. - Store Equip.
Office Equipment
Accum. Dep. - Office Equip.
Accounts Payable
Notes Payable(due 5 years)
R. Andrew, Capital
R. Andrew, Drawing
Income Summary
Sales
Sales Returns and Allow.
Purchases
Purchase Discounts
Purchase Returns and Allow.
Sales Salary Expense
Office Salary Expense
Store Supplies Expense
Office Supplies Expense
Insurance Expense
Dep. Exp-Store Equip.
Dep. Exp.-Office Equip.
Net Income
10,500
5,210
77,000
Balance Sheet
Debit
Credit
12,000
23,000
8,400
1,600
850
420
56,000
23,000
12,000
6,540
6,500
23,000
58,840
6,500
8,400
135,200
1,400
16,000
12,000
3,800
2,600
4,500
6,000
4,500
142,110
145,000
120,770
117,880
2,890
145,000
145,000
120,770
2,890
120,770
16-4