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Grant Company's Work Sheet

The income statement and balance sheet columns of Grant Company's work sheet reflects the following totals:

Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $58,000 $50,000 $34,000 $42,000

1. The net income (or loss) for the period is
a. $50,000 income.
b. $8,000 income.
c. $8,000 loss.
d. not determinable.

2. To enter the net income (or loss) for the period into the above work sheet requires an entry to the
a.income statement debit column and the balance sheet credit column.
b.income statement credit column and to the balance sheet debit column.
c.income statement debit column and the income statement credit column.
d.balance sheet debit column and to the balance sheet credit column.

3. Closing entries are made
a.in order to terminate the business as an operating entity.
b.so that all assets, liabilities, and stockholders' equity accounts will have zero balances when the next accounting period starts.
c.in order to transfer net income (or loss) and dividends to the Retained Earnings account.
d. so that financial statements can be prepared

4. Two categories of expenses for merchandisers are
a. cost of goods sold and financing expenses.
b. operating expenses and financing expenses.
c. cost of goods sold and operating expenses.
d. sales and cost of goods sold.

5. Sales revenue less cost of goods sold is called
a. gross profit.
b. net profit.
c. net income.
d. marginal income.
6. After gross profit is calculated, operating expenses are deducted to determine
a. gross margin.
b. net income.
c. gross profit on sales.
d. net margin.

7. Which of the following expressions is incorrect?
a. Gross profit - operating expenses = net income
b. Sales - cost of goods sold - operating expenses = net income
c. Net income + operating expenses = gross profit
d. Operating expenses - cost of goods sold = gross profit

8. Which of the following is a true statement about inventory systems?
a. Periodic inventory systems require more detailed inventory records.
b. Perpetual inventory systems require more detailed inventory records.
c. A periodic system requires cost of goods sold be determined after each sale.
d. A perpetual system determines cost of goods sold only at the end of the accounting period.

9. In a perpetual inventory system, cost of goods sold is recorded
a. on a daily basis.
b. on a monthly basis.
c. on an annual basis.
d. with each sale.

10. Which of the following would not be classified as a contra account?
a. Sales
b. Sales Returns and Allowances
c. Accumulated Depreciation
d. Sales Discounts

11. Items waiting to be used in production are considered to be
a. raw materials.
b. work in progress.
c. finished goods.
d. merchandise inventory.

12. The factor which determines whether or not goods should be included in a physical count of inventory is
a. physical possession.
b. legal title.
c. management's judgment.
d. whether or not the purchase price has been paid.

Solution Preview

The income statement and balance sheet columns of Grant Company's work sheet reflects the following totals:

Income Statement Balance Sheet
Dr. Cr. Dr. Cr.
Totals $58,000 $50,000 $34,000 $42,000

1. The net income (or loss) for the period is
a. $50,000 income.
b. $8,000 income.
c. $8,000 loss.
d. not determinable.

Answer: C

2. To enter the net income (or loss) for the period into the above work sheet requires an entry to the
a.income statement debit column and the balance sheet credit column.
b.income statement credit column and to the balance sheet debit column.
c.income statement debit column and the income statement credit column.
d.balance sheet debit column and to the balance sheet credit column.

Answer: A

3. ...

Solution Summary

This solution is comprised of a detailed explanation to answer financial accounting multiple choice questions.

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