Accounting Chapter 5 SmartBook

The income statement for ABC Company shows Gross profit of $144,000; Operating expenses of $130,000; and Cost of goods sold of $216,000. What is net sales revenue

$360,000; Net sales revenue - Cost of goods sold = Gross profit. To solve for sales, rearrange the equation as Gross profit + Cost of goods sold = Net sales revenue (= $144,000 + 216,000 = $360,000)

Using the following information from Florist Gumps' financial statements, calculate the gross profit percentage. Net sales of $10,000; Cost of goods sold of $6,000; Operating expense of $2,000; Net income of $1,000

40%; Gross profit percentage equals 40% (= ($10,000 - $6,000)/$10,000)

Which of the following would be classified as discontinued operations?

Abandoning a product line Closing the largest of the company's three stores

Which of the following appears on the statement of stockholders' equity?

Additional paid-in capital Beginning balance of retained earnings Net income Dividends Common stock

Which of the following are sections found in a statement of cash flows

Cash Flows from Financing Activities Cash Flows from Operating Activities Cash Flows from Investing Activities

Match the section of the statement of cash flows with the appropriate descriptions; Match the section of the statement of cash flows with the appropriate descriptions

Cash flows associated with earning income

Match the section of the statement of cash flows with the appropriate descriptions; Cash Flows from Investing Activities

Cash flows associated with the purchase and sale of productive assets

Match the section of the statement of cash flows with the appropriate descriptions; Cash Flows from Financing Activities

Cash flows related to borrowings, stocks and dividend payments

_______________ financial statements report financial statement values for the current period and one or more other prior periods

Comparative

______ income is reported on an additional statement or combined with the income statement and is calculated as Net Income plus other gains/losses on items such as foreign currency translation and derivatives

Comprehensive

True or false: GAAP permits only one accounting method to choose from in computing amounts on the financial statements requiring all companies to use the straight-line method of depreciation

False: GAAP sometimes permit different methods to choose from in computing values on the financial statements

Identify which of the following are nonoperating items on the income statement

Gains on sale of fixed assets Income tax expense Provision for income taxes

Earnings per share (EPS) equals ______ divided by the average shares of common stock outstanding. (Assume no preferred stock has been issued.)

Net Income

Which line item on the statement of stockholders' equity is also found on the income statement?

Net income

Which financial statement shows the changes in equity accounts during the accounting period?

Statement of stockholders' equity

True or false: The statement of stockholders' equity indicates the changes in the various equity accounts

True: A column for each stockholders' equity account is shown with the increases and decreases for the period

True or false: Comparative financial statements include separate columns for more than one period's results

True: Two or more years of results are reported in comparative financial statements so that comparisons can be made

The notes to financial statements may include ______

accounting policies applied relevant information, not disclosed on the statements revenues broken out by geographic region segment information

Up Against The Wall, Inc. discontinued its wallpaper operations in the Southeast. Up Against The Wall will report the loss on the sale of operations and the related net operating loss from the beginning of the year through to the final sale ______

below Gross Profit on the income statement

Nonoperating items are found _______ on a classified income statement

below Operating Income

Income before income tax expense is an important measure of financial performance as it allows investors ________

compare companies' pretax levels of income

Financial statement formats and disclosures ________

differ slightly among companies

Relevant financial information not disclosed on the financial statements must be ______

disclosed in the notes

If a company reports Amortization Expense for the period, it must have _______

intangible assets on its balance sheet

Deferred revenue is a(n) ______

liability resulting from the collection of revenue in advance

The format of financial statements and the volume of disclosures reported _______

may vary from one company to another

Deferred revenue that is not expected to be earned within the year is classified as a ________ on the balance sheet

noncurrent liability

The ____________ in the annual report should be reviewed to determine the significant accounting rules used

notes

The best place to determine revenues by geographic region is the ______

notes to the financial statements

Earnings per share (EPS) appear ______

on the income statement

The notes to financial statements may include information about ______ that are not included in the financial statements

possible legal obligations purchase commitments

The notes to the financial statements typically provide detail support of ______

revenues by geographic region business segments makeup of property, plant and equipment

Accumulated amortization is ______

similar to depreciation except it is netted against intangible assets instead of tangible assets a contra-asset account similar to accumulated depreciation

Comprehensive income may be shown on ______

the income statement by adding or subtracting special items, such as changes in foreign currency exchange rates and certain investments

On the income statement, Operating Income differs from Income before Income Taxes in that ______ are subtracted from Operating Income to arrive at Income before Income Taxes

transactions that are non-operating or infrequently occurring

One of the main purposes of the first note to the financial statements is to disclose ______

which of the alternative accounting methods was used to measure the effects of transactions