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 E.

1. 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
$______________

2. 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)

3. 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.

4. 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)

5. 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.

6. 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

7. 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

8. 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

9. 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.

10. 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

11. 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.

12. 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.

13. 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.

14. 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

15. 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

16. ____
23.
Accounts Receivable