Accounting General Journal, 9E: Chapter 15
For a merchandising business, every sales dollar includes what four components?
1. Cost of merchandise sold 2. Gross profit on sales 3. Total Expenses 4. Net Income
What three items are listed on the balance sheet for an account having a related contra asset account?
1. The balance of the asset account 2. The balance of the asset's contra account 3. Book value
How does a corporation distribute a portion of income to stockholders?
As a dividend.
How is the cost of merchandise sold calculated?
Beginning merchandise inventory + Purchases = Total cost of merchandise available for sale - Ending merchandise inventory = Cost of merchandise sold.
How can the amount of net income calculated on the income statement be verified?
By comparing the amount calculated on the income statement with the amount on the work sheet.
How does a company determine acceptable component percentages?
By making comparisons with prior fiscal periods as well as with industry standards that are published by industry net loss.
What are the two major sections of a statement of stockholders' equity?
Capital Stock and Retained Earnings
Where is the beginning balance of retained earnings found?
In the Balance Sheet Credit column of a work sheet
Where is the information found to prepare the capital stock section of a statement of stockholders' equity?
In the Capital Stock general ledger account
What is an example of a long-term liability?
Mortgage payable.
What is the result if total expenses are greater than gross profit on sales?
Net Loss
What are two supporting schedules that might accompany a balance sheet?
Schedule of accounts payable and schedule of accounts receivable
Where is the amount of dividends found?
Schedule of accounts payable and schedule of accounts receivable.
financial ratio
a comparison between two items of financial information
statement of stockholders' equity
a financial statement that shows changes in a corporation's ownership for a fiscal period
supporting schedule
a report prepared to give details about an item on a principal financial statement
par value
a value assigned to a share of stock and printed on the stock certificate
current liabilities
liabilities due within a short time, usually within a year
long-term liabilities
liabilities owed for more than a year
earnings per share
the amount of net income after federal income tax belonging to a single share of stock
cost of merchandise sold
the original price of all merchandise sold during a fiscal period
price-earnings ratio
the relationship between the market value per share and earnings per share of a stock
gross profit on sales
the revenue remaining after cost of merchandise sold has been deducted
net sales
total sales less sales discount and sales returns and allowances
Where are the amounts obtained for the stockholders' equity section of the balance sheet?
From the statement of stockholders' equity.
How does Hobby Shack classify its assets?
Current and plant assets
What financial information does a statement of stockholders' equity report?
The changes in a corporation's ownership for a fiscal period.
What is the major difference between the income statement for a merchandising business and as service business?
The cost of merchandise sold section.
