Accounting Exam 2

organizes assets and liabilities into important subgroups. lists current assets in the order of how quickly they can be converted to cash.

A classified balance sheet can be described as a balance sheet that

a reduction in the selling price of defective or unacceptable merchandise sold to customers

A sales allowance can be described as:

Owner of goods held by another party who will sell them for the owner.

Consignor

gross profit

Cost of goods sold is subtracted from net sales to determine

Asset accounts Liability accounts Permanent accounts

Demonstrate your knowledge of preparing a post-closing trial balance by selecting the accounts below that would be included on it.

net income.

Expenses are subtracted from gross profit to calculate

the closing process resets the balances in temporary accounts to zero. the closing process helps summarize a period's revenues and expenses.

Explain your understanding of the closing process by choosing the correct statements below.the closing process resets the balances in temporary accounts to zero.

goods are included in buyers inventory after arrival at the destination

FOB destination

goods are included in buyers inventory once they are shipped

FOB shipping point

The company would add the net income amount to the Credit column of the Balance Sheet & Owner's Equity columns of a work sheet.

Given that a company reported net income for the year, determine how a company would complete its work sheet for the period by choosing the correct statement below.

sales

Gross profit is computed as net ( ) minus cost of goods sold.

Accounts payable Taxes payable Unearned rent

Identify the accounts below that would be classified as current liabilities on a classified balance sheet

Bonds payable Mortgage payable Notes payable

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet.

Shrinkage is the term used to refer to the loss of inventory due to theft or deterioration.

Identify the statement below that is the correct definition of "shrinkage".

Accounts receivable Office supplies Prepaid rent Cash

Identify which of the accounts below would be classified as a current asset.

Office supplies Accounts receivable Prepaid rent Cash

Identify which of the accounts below would be classified as a current asset.

Equipment Building Land used to produce or sell products and services Machinery

Identify which of the accounts below would be classified as a plant asset account.

customers

Merchandise consists of products that a company acquires to resell to

The length of a company's operating cycle depends on its activities. Most operating cycles are less than one year. The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services. Most companies use a one-year period or operating cycle in deciding which assets and liabilities are current.

Review the statements below and select the items that are correct regarding the operating cycle for a business.

Information from the Adjustments columns are used for the adjusting journal entries. Journalizing and posting adjusting entries is required after adjustments are entered in a work sheet.

Select the statement(s) below which correctly describe how to use the work sheet in the adjustment process.

1. Journalize transactions into the journal 2. prepare unadjusted trial balance 3. adjust and post accounts 4. prepare adjusted trial balance 5. prepare financial statements

Some of the steps in the accounting cycle are listed below. Place them in the correct order of use.

1. Current Assets 2. Long term investments 3. plant assets 4. intangible assets 5. current liabilities 6. noncurrent liabilities

The following categories are on a classified balance sheet. List them in the order that they would appear.

recorded in a separate temporary account which is closed at period end

Under a periodic inventory system, purchases are

Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are liabilities due to be paid within one year.

What are current liabilities?

Long-term investments are investments in stocks and bonds when they are expected to be held for more than one year or the operating cycle. Notes receivable and stock and bond investments are assets that are expected to be held for more than one year.

What defines a long-term investment?

Owner, Capital; Accounts Payable; Accumulated Depreciation

Which of the lists below contains only permanent accounts?

A temporary account will not appear on a post-closing trial balance.

Which of the statements below is correct regarding the difference between a temporary account and a permanent account?

Permanent accounts will appear on a post-closing trial balance. Permanent accounts are reported on the balance sheet. Owner, Capital is a permanent account, but Owner, Withdrawals is a temporary account. Most temporary accounts are reported on the income statement. Temporary accounts have a balance for one period only.

Which statements below are true regarding permanent and temporary accounts?

Cost of goods sold is computed at the end of the period.

periodic inventory system

The Merchandise Inventory account is updated only at the end of the period

periodic inventory system

The Purchase Discounts account is used during the period.

periodic inventory system

The Purchase Returns and Allowances account is used during the period.

periodic inventory system

The Purchases account is used during the period.

periodic inventory system

Receiver of goods owned by another who holds them for purposes of selling them for the owner.

Consignee

Plant assets are property, plant and equipment that are tangible. Plant assets are used to produce or sell products or services. Plant assets are equipment and other assets that have a life greater than one year.

Define plant assets by selecting the correct statements below.

All permanent accounts with a balance in the general ledger will be included. The capital account on the post-closing trial balance will include the net income or net loss for the period. The total of all debit balances will equal the total of all credit balances.

In preparing a post-closing trial balance, which of the following statements are correct?

If a loss occurs, it is added to the Debit column of the Balance Sheet. If a net income occurs, it is added to the Credit column of the Balance Sheet. Adding net income to the Credit column of the Balance Sheet & Owner's Equity columns implies that it is to be added to Owner, Capital. If a net income occurs, it is added to the Debit column of the Income Statement.

Which of the following statements is (are) correct about completing a work sheet? (

The balance in the Merchandise Inventory account remains the beginning balance until the end of the period.

periodic inventory system