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Krafty Foods

 

                                                  Income Statement

 

                                  For the Year Ended December 31, 2013

 

 

 

                                                                                                                                                               

 

($ in Millions)

 

Operating revenues                                                  $_____________

 

Cost of Sales                                                           $_____________

 

Gross Profit                                                             $_____________

 

Marketing, general and administration

 

   Expenses                                                              $______________

 

Operating Income                                                    $______________

 

Interest and other debt expense, net                        $______________

 

Income before taxes                                                $______________

 

Income tax expense                                                 $______________

 

Net Income                                                              $_______________

 

 

 

 

 

1.

Which of the following is in accordance with generally accepted accounting principles?

 

A)

Accrual-basis accounting

 

B)

Cash-basis accounting

 

C)

Both accrual-basis and cash-basis accounting

 

D)

Neither accrual-basis nor cash-basis accounting

 

 

 

 

 

2.

Adjusting entries are required

 

A)

yearly.

 

B)

quarterly.

 

C)

monthly.

 

D)

every time financial statements are prepared.

 

 

 

 

 

3.

Accumulated Depreciation is

 

A)

an expense account.

 

B)

an owner’s equity account.

 

C)

a liability account.

 

D)

a contra asset account.

 

 

 

 

 

4.

Depreciation is the process of

 

A)

valuing an asset at its fair value.

 

B)

increasing the value of an asset over its useful life in a rational and systematic manner.

 

C)

allocating the cost of an asset to expense over its useful life in a rational and systematic manner.

 

D)

writing down an asset to its real value each accounting period.

 

 

 

 

 

5.

Unearned revenue is classified as

 

A)

an asset account.

 

B)

a revenue account.

 

C)

a contra-revenue account.

 

D)

a liability account.

 

 

 

 

 

6.

At March 1, Psychocandy Inc. reported a balance in Supplies of $200. During March, the company purchased supplies for $750 and consumed supplies of $800. If no adjusting entry is made for supplies

 

A)

owner’s equity will be overstated by $800.

 

B)

expenses will be understated by $750.

 

C)

assets will be understated by $250.

 

D)

net income will be understated by $800.

 

 

 

 

 

7.

Stone Roses Candies paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29–31). Employees work 5 days a week and the company pays $1,500 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January?

 

A)

Salaries and Wages Expense

1,500

 

          Salaries and Wages Payable

 

1,500

 

B)

Salaries and Wages Expense

7,500

 

          Salaries and Wages Payable

 

7,500

 

C)

Salaries and Wages Expense

4,500

 

          Salaries and Wages Payable

 

4,500

 

D)

No adjusting entry is required.

 

 

 

 

 

8.

The adjusted trial balance is prepared

 

A)

after financial statements are prepared.

 

B)

before the trial balance.

 

C)

to prove the equality of total assets and total liabilities.

 

D)

after adjusting entries have been journalized and posted.

 

 

 

 

 

9.

Closing entries may be prepared from all of the following except

 

A)

Adjusted balances in the ledger

 

B)

Income statement and balance sheet columns of the worksheet

 

C)

Balance sheet

 

D)

Income and owner’s equity statements

 

 

 

 

 

10.

The income statement for the month of June, 2014 of Camera Obscura Enterprises contains the following information:

Revenues

 

$7,000

Expenses:

 

 

Salaries and Wages Expense

$3,000

 

 

Rent Expense

1,500

 

 

Advertising Expense

800

 

 

Supplies Expense

300

 

 

Insurance Expense

     100

 

 

 

Total expenses

 

  5,700

Net income

 

$1,300

         

 

The entry to close the expense accounts includes a

 

A)

debit to Income Summary for $1,300.

 

B)

credit to Rent Expense for $1,500.

 

C)

credit to Income Summary for $5,700.

 

D)

debit to Salaries and Wages Expense for $3,000.

 

 

 

 

 

11.

The income statement for the year 2014 of Fugazi Co. contains the following information:

Revenues

 

$70,000

Expenses:

 

 

Salaries and Wages Expense

$45,000

 

 

Rent Expense

12,000

 

 

Advertising Expense

10,000

 

 

Supplies Expense

6,000

 

 

Utilities Expense

2,500

 

 

Insurance Expense

    2,000

 

 

 

Total expenses

 

  77,500

Net income (loss)

 

$(7,500)

         

 

The entry to close the revenue account includes a

 

A)

debit to Income Summary for $7,500.

 

B)

credit to Income Summary for $7,500.

 

C)

debit to Revenues for $70,000.

 

D)

credit to Revenues for $70,000.

 

 

 

 

 

12.

A current asset is

 

A)

the last asset purchased by a business.

 

B)

an asset which is currently being used to produce a product or service.

 

C)

usually found as a separate classification in the income statement.

 

D)

an asset that a company expects to convert to cash or use up within one year.

 

 

 

 

 

13.

On a classified balance sheet, current assets are customarily listed

 

A)

in alphabetical order.

 

B)

with the largest dollar amounts first.

 

C)

in the order of liquidity.

 

D)

in the order of acquisition.

 

 

 

 

 

14.

Balance sheet accounts are considered to be

 

A)

temporary owner’s equity accounts.

 

B)

permanent accounts.

 

C)

capital accounts.

 

D)

nominal accounts.

 

 

 

 

 

15.

Income Summary has a credit balance of $17,000 in S. Sufjan Co. after closing revenues and expenses. The entry to close Income Summary is

 

A)

credit Income Summary $17,000, debit Owner’s Capital $17,000.

 

B)

credit Income Summary $17,000, debit Owner’s Drawings $17,000.

 

C)

debit Income Summary $17,000, credit Owner’s Drawings $17,000.

 

D)

debit Income Summary $17,000, credit Owner’s Capital $17,000.

 

 

 

 

 

16.

The net income (or loss) for the period

 

A)

is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

 

B)

is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet.

 

C)

cannot be found on the worksheet.

 

D)

is found by computing the difference between the income statement columns of the worksheet.

 

 

 

 

 

 

Instructions: Place a “D” (Debit) or “C” (Credit) on the answer sheet to indicate whether the account

 would be debited or credited for its balance in the closing process. Insert an X in the space provided

if the account is not closed.

 

 _____17. Net Summary ( Assume Net loss) 

____

18.

Cash

____

24.

Interest Expense

____

19.

Rent Expense

____

25.

Unearned Subscription Revenue

____

20.

Depreciation Expense

 

 

 

____

21.

Equipment

 

 

 

____

22

Owner’s Drawing

 

 

 

____

23.

Accounts Receivable