5) Which of the following statements concerning the worksheet is correct?
A) When a worksheet is used, there is no need to make journal entries.
B) A worksheet consists of seven sections.
C) Section 5 (Income Statement) and Section 6 (Balance Sheet) are optional.
D) A completed worksheet is a substitute for the financial statements.
6) The last two columns generally found on the right side of the worksheet are the income statement
columns.
7) The Dividends account is included in the income statement section of the worksheet.
8) The ending balance in the Retained Earnings account is shown on the income statement columns of the
worksheet.
9) In the worksheet, the adjusted balance of the Service Revenue account appears in the credit column of
the income statement.
10) When preparing a worksheet, net income is recorded in the ________.
A) income statement credit column
B) adjusted trial balance debit column
C) income statement debit column
D) balance sheet debit column
11) The Interest Expense in the worksheet‘s unadjusted trial balance column is $1,000. Interest Expense in
the income statement column is $12,000. Which of the following entries would have caused this
difference?
A) a $12,000 credit to Interest Expense in the worksheet’s adjustments column
B) a $12,000 credit to Interest Payable in the worksheet’s adjustments column
C) a $11,000 debit to Interest Expense in the worksheet’s adjustments column
D) a $11,000 credit to Interest Expense in the worksheet’s adjustments column
12) Which of the following accounts would appear in the income statement credit column of the
worksheet?
A) Service Revenue
B) Prepaid Insurance
C) Unearned Revenue
D) Depreciation Expense
13) Which of the following accounts would appear in the income statement debit column of the
worksheet?
A) Unearned Revenue
B) Service Revenue
C) Depreciation Expense
D) Prepaid Insurance
14) The income statement section of the worksheet includes ________.
A) Land and Salaries Payable
B) Common Stock, Retained Earnings, and Dividends
C) Furniture and Cash
D) Service Revenue and Utilities Expense
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15) The following is the adjusted trial balance columns from the worksheet for Picture Perfect
Photography.
Picture Perfect Photography
Adjusted Trial Balance
December 31, 2018
Accounts Debit Credit
Cash $ 15,000
Accounts Receivable 30,000
Prepaid Insurance 7,500
Office Supplies 3,200
Land 40,000
Building 160,000
Accumulated Depreciation—Building $12,000
Equipment 75,000
Accumulated Depreciation—Equipment 8,500
Accounts Payable 12,000
Salaries Payable 2,000
Unearned Revenue 25,000
Mortgage Payable 100,000
Common Stock 21,290
Dividends 23,000
Service Revenue 289,000
Salaries Expense 61,000
Depreciation Expense—Building and Equipment 6,150
Office Supplies Expense 14,040
Insurance Expense 14,000
Utilities Expense 20,900
Total $469,790 $469,790
Using the information provided in the worksheet above, prepare an income statement for Picture Perfect
Photography.
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Copyright © 2018 Pearson Education, Inc.
Answer:
Picture Perfect Photography
Income Statement
For the Year Ended December 31, 2018
Revenue:
Service Revenue $289,000
Expenses:
Salaries Expense $61,000
Utilities Expense 20,900
Office Supplies Expense 14,040
Insurance Expense 14,000
Depreciation Expense—
Building and Equipment 6,150
Total expenses 116,090
Net income $172,910
Diff: 2
LO: 4-2
AACSB: Application of knowledge
AICPA Functional: Measurement
PE Question Type: Application
H2: Section 5 – Income Statement
16) The balance sheet section of the worksheet includes the asset and liability accounts and all equity
accounts except revenues and expenses.
17) The balance sheet section of the worksheet includes the asset and liability accounts and all equity
accounts, including all revenues and expenses.
18) Which of the following adjusted balances would appear in the balance sheet credit column of a
worksheet?
A) Rent Revenue
B) Insurance Expense
C) Salaries Payable
D) Equipment
19) Prepaid Rent in the worksheet’s unadjusted trial balance column is $7,000. Prepaid Rent in the balance
sheet column is $6,000. Which of the following entries would have caused this difference?
A) a $1,000 debit entry to Prepaid Rent in the worksheet’s adjustments column
B) a $1,000 credit entry to Rent Expense in the worksheet‘s adjustments column
C) a $1,000 credit entry to Prepaid Rent in the worksheet’s adjustments column
D) a $1,000 credit entry to Rental Revenue in the worksheet’s adjustments column
20) Which of the following accounts would appear in the balance sheet credit column of the worksheet?
A) Prepaid Insurance
B) Buildings
C) Unearned Revenue
D) Service Revenue
21) Which of the following accounts would appear in the balance sheet debit column of the worksheet?
A) Unearned Revenue
B) Accumulated Depreciation
C) Service Revenue
D) Prepaid Insurance
22) Net income is entered as the balancing amount on the debit side of the income statement columns and
the credit side of the balance sheet columns of the worksheet.
23) Net income (loss) is the difference between the total debits and the total credits in the income
statement columns of the worksheet.
24) Net income or net loss is the balancing amount on the worksheet and should always be entered on the
side that makes the debit and credit columns balance.
25) The worksheet is an external tool that can be used to help in recording adjusting entries and
preparing financial statements.
26) Which of the following statements is true of the worksheet?
A) The worksheet is a tool that takes the place of financial statement preparation.
B) The worksheet is a document used to summarize data to prepare financial statements.
C) The worksheet is a financial statement issued to the public to communicate the financial results of a
company.
D) The worksheet is a type of journal.
27) Which of the following is true of a completed worksheet?
A) The total debits in the unadjusted trial balance column equal the total debits in the adjusted trial
balance column.
B) The total debits in the income statement column equal the total credits in the balance sheet column.
C) The total debits in the income statement column equal the total debits in the balance sheet column.
D) The total of all the debit columns is equal to the total of all the credit columns.
28) Where does net income appear on a worksheet?
A) Net income appears only in the income statement debit column.
B) Net income appears in the balance sheet credit column and in the income statement debit column.
C) Net income appears in the income statement credit column and in the balance sheet debit column.
D) Net income appears only in the balance sheet credit column.
29) Which of the following statements is true if the income statement debit column exceeds the income
statement credit column of a worksheet?
A) The company incurred a net loss.
B) The retained earnings account increased during the period.
C) The company made a net profit.
D) An error was made.
30) Which of the following statements is true if the income statement credit column exceeds the income
statement debit column on a worksheet?
A) The company made a net profit.
B) The company incurred a net loss.
C) The retained earnings account decreased during the period.
D) An error was made.
31) In which of the columns of a worksheet would a net loss be found?
A) in the balance sheet credit column and the income statement debit column
B) in the balance sheet debit column and the income statement credit column
C) in the unadjusted trial balance credit column, the adjusted trial balance credit column, and the balance
sheet credit column
D) in the unadjusted trial balance debit column, the adjusted trial balance debit column, and the balance
sheet debit column
32) In which of the columns of the worksheet would Net Income be found?
A) the unadjusted trial balance credit column, the adjusted trial balance credit column, and the balance
sheet credit column
B) the unadjusted trial balance debit column, the adjusted trial balance debit column, and the balance
sheet debit column
C) the balance sheet debit column and the income statement credit column
D) the balance sheet credit column and the income statement debit column
4.3 Learning Objective 4-3
1) The adjusting process zeroes out all revenue accounts and all expense accounts.
2) The closing process helps in measuring each period’s net income separately from all other periods.