1 Two income statements for Toby Sam Enterprises are shown below Toby Sam Enterprises Income Statement For the Years 2 and 1 Ending December 31 Year 2 Year 1 Fees earned $674,350 $520,600 Operating expenses 472,045 338,390 Operating income $202,305 $182,210 Prepare a vertical analysis of Toby Sam Enterprises income statements Has operating income increased or decreased as a percentage of revenue a increased by 111 b decreased by 5 c decreased by 111 d increased by 5 2 The following accounts were taken from the Adjusted Trial Balance columns of the work sheet Accumulated Depreciation $ 3,200 Fees Earned 17,400 Depreciation Expense 1,300 Insurance Expense 400 Prepaid Insurance 4,800 Supplies 900 Supplies Expense 3,800 Net income for the period is a $5,500 b $17,400 c $11,900 d $8,700 3 The ratio of sales to assets measures how effectively a business is using its assets to generate sales True or False 4 The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements True or False 5 Gently Laser Clinic purchased laser equipment for $8,500 and paid $2,250 down, with the remainder to be paid later The correct entry would be a Equipment 8,500 Accounts Payable 6,250 Cash 2,250 b Cash 2,250 Accounts Payable 6,250 Equipment 8,500 c Equipment 2,250 Cash 2,250 d Equipment Expense 8,500 Accounts Payable 2,250 Cash 6,250 6 Using the following information, what is the amount of net income Purchases $32,000 Selling expense $ 960 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Administrative expense 910 Sales 63,000 Rent revenue 1,200 Interest expense 1,040 a $29,960 b $29,510 c $29,350 d $28,310 7 During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits 8 Multiple step income statements show a neither gross profit nor income from operations b income from operations but not gross profit c gross profit but not income from operations d both gross profit and income from operations 9 When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income 10 The following lots of a particular commodity were available for sale during the year Beginning inventory 10 units at $60 First purchase 25 units at $65 Second purchase 30 units at $68 Third purchase 15 units at $75 The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year What is the amount of the inventory at the end of the year rounded to nearest dollar using the average cost method a $1,575 b $1,685 c $3,705 d $1,805 11 As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000 During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000, and liabilities were $270,000 a $50,000 b $370,000 c $45,000 d $106,000 12 The type of account and normal balance of Unearned Consulting Fees is a revenue, credit b liability, credit c liability, debit d expense, debit

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1. Two income statements for Toby Sam Enterprises are shown below: Toby Sam Enterprises Income Statement For the Years 2 and 1 Ending December 31

1. Two income statements for Toby Sam Enterprises are shown below:

Toby Sam Enterprises
Income Statement
For the Years 2 and 1 Ending December 31

	Year 2	Year 1
Fees earned	$674,350	$520,600
Operating expenses	472,045	338,390
Operating income	$202,305	$182,210

Prepare a vertical analysis of Toby Sam Enterprises income statements. Has operating income increased or decreased as a percentage of revenue?

a. increased by 111%

b. decreased by 5%

c. decreased by 111%

d. increased by 5%

The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:

Accumulated Depreciation	$ 3,200
Fees Earned	17,400
Depreciation Expense	1,300
Insurance Expense	400
Prepaid Insurance	4,800
Supplies	900
Supplies Expense	3,800

Net income for the period is

a.$5,500

b.$17,400

c.$11,900

d.$8,700

3.The ratio of sales to assets measures how effectively a business is using its assets to generate sales. True or False

4. The most important differences between a service business and a retail business are reflected in their operating cycles and financial statements. True or False

Gently Laser Clinic purchased laser equipment for $8,500 and paid $2,250 down, with the remainder to be paid later. The correct entry would be

a.Equipment 8,500 Accounts Payable 6,250 Cash 2,250

b.Cash 2,250 Accounts Payable 6,250 Equipment 8,500

c.Equipment 2,250 Cash 2,250

d.Equipment Expense 8,500 Accounts Payable 2,250 Cash 6,250

Using the following information, what is the amount of net income?

Purchases	$32,000	Selling expense	$ 960
Merchandise inventory, September 1	5,700	Merchandise inventory, September 30	6,370
Administrative expense	910	Sales	63,000
Rent revenue	1,200	Interest expense	1,040

a.$29,960

b.$29,510

c.$29,350

d.$28,310

7. During periods of rapidly rising costs, the use of the LIFO method results in illusory or inventory profits.

Multiple-step income statements show

a. neither gross profit nor income from operations

b. income from operations but not gross profit

c. gross profit but not income from operations

d. both gross profit and income from operations

9. When preparing an income statement vertical analysis, each revenue and expense is expressed as a percent of net income.

10.

The following lots of a particular commodity were available for sale during the year:

Beginning inventory	10 units at $60
First purchase	25 units at $65
Second purchase	30 units at $68
Third purchase	15 units at $75

The firm uses the periodic system and there are 25 units of the commodity on hand at the end of the year. What is the amount of the inventory at the end of the year rounded to nearest dollar using the average cost method?

a.$1,575

b.$1,685

c.$3,705

d.$1,805

11.

As of the end of its accounting period, December 31, Year 1, Great Plains Company has assets of $940,000 and liabilities of $300,000. During Year 2, stockholders invested an additional $73,000 and received $33,000 in dividends from the business. What is the amount of net income during Year 2, assuming that as of December 31, Year 2, assets were $995,000, and liabilities were $270,000?

a. $50,000

b. $370,000

c. $45,000

d. $106,000

12.

The type of account and normal balance of Unearned Consulting Fees is

a. revenue, credit

b. liability, credit

c. liability, debit

d. expense, debit