Chapter 13 Concepts

The accounts receivable turnover ratio is calculated by taking: average accounts receivable / net income net credit sales / average accounts receivable average accounts receivable/ net sales net income / average accounts receivable

net credit sales / average accounts receivable

The excess of revenue over expenses is called _____ _____.

net income

When there are more expenses than revenue, the excess of expenses over revenue is called _________ _________.

net loss

Gross Profit Percentage is calculated by taking gross profit divided by _______ _______.

net sales

Entries that are made to reverse the effects of certain adjustments are called ______ entries. reversing adjusting closing

reversing

Entries that are made to reverse the effects of certain adjustments are called _________ entries

reversing

The accounts receivable turnover ratio is calculated by taking _________ _________ ________ divided by average accounts receivable.

net credit sales

Net Income (loss) from Operations is computed by summing which of the following items: - Gross Profit on Sales - Cost of Goods Sold + Total Operating Expenses + Cost of Goods Sold + Gross Profit on Sales - Total Operating Expenses

+ Gross Profit on Sales - Total Operating Expenses (Cost of Goods Sold is used to compute Gross Profit on Sales)

What are the components of Cost of Goods Sold? Check all that apply. Sales Ending Merchandise Inventory Net Delivered Cost of Purchases Beginning Merchandise Inventory

Ending Merchandise Inventory Net Delivered Cost of Purchases Beginning Merchandise Inventory

Identify which accounts would appear in a post-closing trial balance: accounts payable drawing purchases cash owner's capital rent expense

accounts payable cash owner's capital

Identify which accounts would appear in a post-closing trial balance: drawing accounts receivable equipment rent expense merchandise inventory supplies expense

accounts receivable equipment merchandise inventory

The ratio that can be used to estimate the average collection period of accounts receivable is the __________ _________ _________ ratio

accounts receivable turnover

The ratio that measures the reasonableness of accounts receivable outstanding, and can be used to estimate the average collection period of accounts receivable is the ___________ ratio. current accounts receivable collection working capital accounts receivable turnover

accounts receivable turnover

Identify the temporary accounts below: advertising expense cash interest payable drawing salaries expense interest income

advertising expense drawing salaries expense interest income

A balance sheet that divides the various assets and liabilities into groups, such as current assets and current liabilities, is called a ________ balance sheet. divided grouped classified

classified

A balance sheet that divides the various assets and liabilities into groups, such as current assets and current liabilities, is called a __________ balance sheet.

classified

A format by which revenues and expenses on the income statement, and assets and liabilities on the balance sheet, are divided into groups of similar accounts and a subtotal is given for each group is called a _______ financial statement. classified divided working

classified

An adjusting entry to record depreciation expense will include a credit to a(n) _________ account. asset liability contra asset

contra asset

An adjusting entry to record depreciation expense will include a credit to a(n) _________ account. contra asset liability asset

contra asset

A ratio that calculates the amount of dollars of current assets the company has for every dollar of current liabilities it has is called the _________ ratio.

current

Cash, items that will normally be converted into cash within one year, and items that will be used up within one year are considered _________ assets.

current

Items that will be converted into cash within one year or will be used within one year are considered _______ assets. long-term limited current

current

Working Capital is calculated by taking: current assets - current liabilities total assets - total liabilities total assets + total liabilities current assets + current liabilities

current assets - current liabilities

The current ratio is computed by taking: current assets - current liabilities current liabilities / current assets current liabilities - current assets current assets / current liabilities

current assets/current liabilities

A company has a current ratio of 1.40. This means that it has $1.40 of current assets for every dollar of _________. total equity current equity total liabilities current liabilities

current liabilities

The ratio that shows the number of times inventory is replaced during the accounting period is called _________ _________.

inventory turnover

After the first two closing entries are made, the income summary account has a $6,000 credit balance. The entry to close the income summary account will include which of the following entries: debit to income summary credit to income summary credit to the owner's capital account debit to the owner's capital account

debit to income summary credit to the owner's capital account

After the first two closing entries are made, the income summary account has a $2,500 debit balance. The entry to close the income summary account will include which of the following entries: debit to the owner's capital account credit to income summary debit to income summary credit to the owner's capital account

debit to the owner's capital account credit to income summary

To calculate the current ratio, take current assets _______ current liabilities. divided by multiplied by less plus

divided by

Gross Profit Percentage is calculated as follows: gross profit multiplied by net sales gross profit multiplied by net income gross profit divided by net income gross profit divided by net sales

gross profit divided by net sales

The gross profit percentage calculates the amount of: net income from each gross profit dollar gross profit from each sales dollar net income from each sales dollar

gross profit from each sales dollar

The ratio that reveals the amount of gross profit from each sales dollar is called the ______. net sales turnover working capital current ratio gross profit percentage

gross profit percentage

Which of the following steps is last in the accounting cycle: prepare financial statements interpret the financial information prepare a postclosing trial balance

interpret the financial information

The ratio that shows the number of times inventory is replaced during the accounting period is called ___________. inventory turnover working capital current ratio

inventory turnover

To compute working capital, take current assets _____ current liabilities. divided by less times plus

less

An adjusting entry for accrued expenses, such as wages expense, will include a credit to a(n) _________ account. contra asset liability asset

liability

Purchases plus Freight In minus Purchases Returns and Allowance plus/minus _______ equals Net Delivered Cost of Purchases plus Purchase Discounts minus Ending Merchandise Inventory plus Ending Merchandise Inventory minus Purchases Discounts

minus Purchases Discounts

An income statement that provides subtotals for cost of goods sold, selling expenses, and general and administrative expenses is called a _________-step income statement.

multiple

A type of income statement on which several subtotals are computed before the net income is calculated, such as gross profit, is called a _______ income statement. multi-total multiple-step single-total single-step

multiple-step (single-step only provides one total: net income)

Working capital is a measure of a firm's ability to: expand operations purchase additional property and equipment pay its current obligations

pay its current obligations

Identify the temporary accounts below: purchases sales drawing rent expense accounts receivable equipment

purchases sales drawing rent expense

A type of income statement where only one computation is needed to determine the net income (total revenue - total expenses = net income) is called a ________-step income statement.

single

A type of income statement where only one computation is needed to determine the net income (total revenue - total expenses = net income) is called a _________ income statement. multiple-step single-total multiple-total single-step

single-step (multiple step: multiple subtotals)

The financial statement that reports net income and owner withdrawals for the period is called the ________. statement of owner's equity balance sheet income statement

statement of owner's equity

The financial statement that reports the changes that occurred in the owner's financial interest during the period is called the ___________. income statement statement of owner's equity balance sheet

statement of owner's equity

Net Income (or Net Loss) from Operations is computed by taking Gross Profit on Sales less ________. net sales cost of goods sold total operating expenses

total operating expenses

Net Income (or Net Loss) from Operations is computed by taking Gross Profit on Sales less ________. net sales total operating expenses cost of goods sold

total operating expenses

A measure of a firm's ability to pay its current obligations, calculated by taking current assets less current liabilities, is called: working capital liability turnover current ratio

working capital