Question : Multiple Choice Questions 21.Gross profit sales calculated by subtracting A.sales returns and : 1220490

Multiple Choice Questions

21.Gross profit on sales is calculated by subtracting  

A.sales returns and allowances from sales.

B.cost of goods sold from net sales.

C.ending inventory from the total merchandise available for sale.

D.total expenses from sales.

22.An income statement that has one total for all revenues and one total for all expenses is known as a  

A.classified income statement.

B.multiple-step income statement.

C.single-step income statement.

D.categorized income statement.

23.Which of the following statements is correct?  

A.The term single-step income statement is sometimes used to describe a classified income statement.

B.If a business is to earn a net income, the gross profit on sales must be greater than operating expenses.

C.Salaries of office employees would be grouped with the selling expenses in the Operating Expenses section of the income statement.

D.Sales less Operating Expenses equals Gross Profit.

24.The beginning capital balance shown on a statement of owner’s equity is $43,000. Net income for the period is $18,000. The owner withdrew $22,000 cash from the business and made no additional investments during the period. The owner’s capital balance at the end of the period is  

A.$39,000.

B.$47,000.

C.$61,000.

D.$83,000.

25.The beginning capital balance shown on a statement of owner’s equity is $86,000. Net income for the period is $36,000. The owner withdrew $44,000 cash from the business and made no additional investments during the period. The owner’s capital balance at the end of the period is  

A.$78,000.

B.$94,000.

C.$122,000.

D.$166,000.

26.The beginning capital balance shown on a statement of owner’s equity is $100,000. Net income for the period is $50,000. The owner withdrew $25,000 cash from the business and made no additional investments during the period. The owner’s capital balance at the end of the period is  

A.$175,000.

B.$150,000.

C.$125,000.

D.$100,000.

27.The balance of the owner’s drawing account is  

A.listed in the Other Expenses section of the income statement.

B.listed in the Current Assets section of the balance sheet.

C.used in the calculation of ending capital on a statement of owner’s equity.

D.listed in the Operating Expenses section of the income statement.

28.Which of the following is not a current asset?  

A.Accounts Receivable

B.Prepaid Insurance

C.Merchandise Inventory

D.Equipment

29.Prepaid expenses appear in the  

A.Operating Expenses section of the income statement.

B.Other Expenses section of the income statement.

C.Current Assets section of the balance sheet.

D.Current Liabilities section of the balance sheet.

30.Which of the following statements is not correct?  

A.The gross profit percentage is calculated by dividing the gross profit for the year by the net sales for the year.

B.The average inventory is calculated by adding the beginning inventory to the ending inventory and dividing the sum by 2.

C.A current ratio of 3.5 to 1 means that a firm has $3.50 in current liabilities for every $1 of current assets.

D.Working capital is the difference between total current assets and total current liabilities.