Chapter 4
120. For a retail firm, the inventory sold is shown on the income statement as:
a.
cost of goods sold.
b.
purchases.
c.
purchases returns and allowances.
d.
net purchases.
a
Easy
Multiple Choice
False
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121. The excess of net revenue from sales over the cost of goods sold is called _____.
a.
accounts receivable
b.
operating income
c.
accounts payable
d.
gross profit
Easy
Multiple Choice
False
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Chapter 4
122. Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as:
a.
selling expenses.
b.
general expenses.
c.
other expenses.
d.
administrative expenses.
Multiple Choice
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123. Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?
a.
Selling expense
b.
Miscellaneous expense
c.
Administrative expense
d.
Other expense
Multiple Choice
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Chapter 4
124. The form of income statement that emphasizes total revenues and total expenses in determining net income is called
the _____.
a.
operating income statement.
b.
multiple-step statement.
c.
cash flow statement.
d.
single-step statement.
Multiple Choice
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125. Multiple-step income statements show:
a.
gross profit but not income from operations.
b.
neither gross profit nor income from operations.
c.
both gross profit and income from operations.
d.
income from operations but not gross profit.
Multiple Choice
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Chapter 4
126. X. Bonds Company
The following is a single-step income statement for the X. Bonds Company:
X. Bonds Company
Income Statement
For the Year Ended December 31, 2016
Revenues:
Net Sales
$300,000
Interest Income
20,000
Total Revenues
$320,000
Expenses:
Cost of Goods Sold
$60,000
Selling Expenses
25,000
General and Administrative Expenses
30,000
Interest Expense
14,000
Income Tax Expense
45,000
Total Expenses
174,000
Net Income
$146,000
Refer to X. Bonds Company. If the income statement were prepared in a multiple-step format, gross profit would be:
a.
$240,000.
b.
$126,000.
c.
$260,000.
d.
$185,000.
a
Moderate
Multiple Choice
False
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Chapter 4
127. X. Bonds Company
The following is a single-step income statement for the X. Bonds Company:
X. Bonds Company
Income Statement
For the Year Ended December 31, 2016
Revenues:
Net Sales
$300,000
Interest Income
20,000
Total Revenues
$320,000
Expenses:
Cost of Goods Sold
$60,000
Selling Expenses
25,000
General and Administrative Expenses
30,000
Interest Expense
14,000
Income Tax Expense
45,000
Total Expenses
174,000
Net Income
$146,000
Refer to X. Bonds Company. If the income statement were prepared in a multiple-step format, income from operations
would be:
a.
$126,000.
b.
$171,000.
c.
$146,000.
d.
$185,000.
Moderate
Multiple Choice
False
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Chapter 4
128. Operating income is calculated by subtracting _____ from gross profit.
a.
operating expenses
b.
prepaid expenses
c.
accrued expenses
d.
non-operating expenses
Multiple Choice
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129. Which of the following is not a subsection in a multiple-step income statement?
a.
Purchase discounts
b.
Gross profit
c.
Operating income
d.
Income before taxes
Multiple Choice
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Chapter 4
130. Which of the following accounts will not be found in the Cost of Goods Sold section on the income statement?
a.
Purchases
b.
Transportation In
c.
Customer Refunds and Allowances
d.
Merchandise Inventory
c
Easy
Multiple Choice
False
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131. Multiple-step income statements show:
a.
gross profit but not net income.
b.
neither gross profit nor net income.
c.
gross profit but not cost of merchandise sold.
d.
gross profit, cost of merchandise sold, income from operations and net income.
Moderate
Multiple Choice
False
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Chapter 4
132. Where are selling and administrative expenses found on the multi-step income statement?
a.
Before gross profit
b.
After sales and before gross profit
c.
After net income and before expenses
d.
After gross profit
Multiple Choice
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7/19/2016 9:49 AM
133. Expenses that cannot be traced directly to operations are identified as:
a.
other revenue.
b.
operating expenses.
c.
cost of goods sold.
d.
other expenses.
Multiple Choice
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Chapter 4
134. A payment of dividends decreases which section on the statement of cash flows?
a.
Operating activities
b.
Investing activities
c.
Financing activities
d.
None of these
Multiple Choice
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7/19/2016 9:49 AM
135. What is one criticism of the single-step income statement?
a.
It is too complex.
b.
It has too many subsections.
c.
Gross profit and income from operations are not available for analysis.
d.
Income taxes are given too much weight.
Multiple Choice
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Chapter 4
136. Based on the given information, calculate the net cash flow from operating activities using the indirect
method. During the previous year, Skyrim Co. reported a net income of $136,500. Its depreciation expense was $38,000
and its accounts payable balance decreased by $29,250.
a.
$98,500
b.
$174,500
c.
$203,750
d.
$145,250
Moderate
Multiple Choice
False
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137. Which of the following should be shown on a statement of cash flows under the financing activity section?
a.
The purchase of a long-term investment in the common stock of another company
b.
The payment of cash to retire a long-term note
c.
The proceeds from the sale of a building
d.
The issuance of a long-term note to acquire land
Moderate
Multiple Choice
False
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Chapter 4
138. Which financial statement reconciles net income with net cash flows from operating activities?
a.
Balance sheet
b.
Statement of stockholders’ equity
c.
Statement of cash flows
d.
Income statement
Multiple Choice
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139. Investing activities include:
a.
collecting cash on loans made.
b.
obtaining cash from creditors.
c.
obtaining capital from owners.
d.
repaying money previously borrowed.
Multiple Choice
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7/19/2016 9:49 AM
Chapter 4
140. Under the indirect method for preparing the statement of cash flows, _____.
a.
each transaction and its effect on cash flows are analyzed
b.
net income is reconciled with net cash flows from operating activities
c.
current liabilities are subtracted from the total cash flows from operating activities
d.
depreciation expense is deducted from net income to calculate the cash flows from operating activities
Multiple Choice
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141. Cash paid to purchase long-term investments would be reported in the statement of cash flows in:
a.
the cash flows from operating activities section.
b.
the cash flows from financing activities section.
c.
the cash flows from investing activities section.
d.
a separate schedule.
Multiple Choice
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Chapter 4
142. By dividing gross profit by cost of merchandise sold we arrive at:
a.
gross profit percent.
b.
average markup percent.
c.
ratio of sales to assets.
d.
sales percent.
Easy
Multiple Choice
False
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143. Calculate the markup percent if sales is $95,500 and cost of goods sold is $55,150.
a.
17.3%
b.
42.3%
c.
73.2%
d.
57.7%
c
Easy
Multiple Choice
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7/19/2016 9:49 AM
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