Module 3 (Financial Statements)

Question 1

Current or Non-current Liability…

Notes Payable?

Answer 1

Non-current

Question 2

Current or Non-current Liability…

Accrued Expenses?

Answer 2

Current

Question 3

Current or Non-current Liability…

Accounts Payable?

Answer 3

Current

Question 4

Current or Non-current Liability…

Taxes Payable?

Answer 4

Current

Question 5

Current or Non-current Liability…

Mortgage Payable

Answer 5

Non-Current

Question 6

Current or Non-current Asset…

PP&E?

Answer 6

Non-Current

Question 7

Current or Non-current Asset…

Liquor License?

Answer 7

Non-Current

Question 8

Current or Non-current Asset…

Inventory?

Answer 8

Current

Question 9

Current or Non-current Asset…

Prepaid Insurance?

Answer 9

Current

Question 10

Current or Non-current Asset…

Software?

Answer 10

Non-current

Question 11

Current or Non-current Asset…

Furniture & Equipment?

Answer 11

Non-current

Question 12

Current or Non-current Asset…

Goodwill?

Answer 12

Non-current

Question 13

Current or Non-current Asset…

Acquired Intangible Assets?

Answer 13

Non-current

Question 14

The income statement reflects a company’s:

A - Financial position over a given period of time.
B - Financial position at a given point in time.
C - Financial performance over a given period of time.
D - Financial performance at a given point in time.

Answer 14

C - Financial performance over a given period of time.

Question 15

Which of the following items represents the net income/(loss) for the year?

A - The difference between the revenues/gains and expenses/losses.
B - The difference between the cash receipts and payments.
C - The difference between the funds raised by stock issuance and the dividends paid.
D - The difference between the net increase in assets and in liabilities.

Answer 15

A - The difference between the revenues/gains and expenses/losses.

Question 16

Which of the following are steps in the closing process? Select all that apply.

A - Nominal accounts are reset to zero.
B - Real accounts are reset to zero.
C - Net income is transferred to the cash account on the balance sheet.
D - Net income is transferred to the retained earnings account on the balance sheet.
E - The retained earnings account is reset to zero.

Answer 16

A - Nominal accounts are reset to zero.

D - Net income is transferred to the retained earnings account on the balance sheet.

Question 17

For the year 2015, Dark Horse Corp.’s sales revenue was $1,600,000. Cost of goods sold (COGS) was 40% of sales revenue. Their income statement shows that operating expense was $150,000.

What was Dark Horse Corp.’s gross profit for 2015?

Answer 17

$960,000
Gross Profit is equal to Sales Revenue minus Cost of Goods Sold, in this case $1,600,000 - $640,000 = $960,000.

The Cost of Goods Sold of $640,000 is found by multiplying $1,600,000 by 40%.

Question 18

For the year 2015, McGuire’s Auto had Operating Income of $320,000. It also had the following expenses:

Salaries and Wages Expense $75,000
Building and Utilities Expense $86,000
Interest Expense $122,000
Income Tax Expense $84,000
Cost of Goods Sold (COGS) for the year was $440,000

What would McGuire’s Auto’s gross profit be for 2015?

Answer 18

$481,000

To get to Gross Profit from Operating Income, we must add back any Operating Expenses. In this case we start with $320,000 Operating Income and add back Salaries and Wages Expense of $75,000 and Building and Utilities Expense of $86,000, to get Gross Profit of $481,000.