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On an income statement, Sales Returns and Allowances and Sales Discounts are: a. added to Sales. O b. added to Gross Profit. O c. deducted from Sales. O d. deducted from Gross Profit. Which of the following amounts are shown in a statement of owner's equity? O a. Wages paid to workers O b. Payment to creditors for goods purchased OC. Depreciation on equipment O d. Additional investment by owner Which of the following is one of the qualifications to be met if an adjusting entry is to be reversed? O a. The adjusting entry increases an asset or liability account. O b. The adjusting entry reduces the capital invested in the firm. OC. The adjusting entry is passed only at the end of a fiscal period. Od. The adjusting entry has the effect of increasing net income. Which of the following current assets appear at the bottom of the Current Assets section when they are recorded in the order of liquidity in a balance sheet? O a. Notes Receivable O b. Prepaid Insurance O c. Accounts Receivable O d. Merchandise Inventory Which of the following is true of reversing entries? O a. They are posted in the special journals. Ob. They are dated as of the first day of the next fiscal period. c. They are passed only for journal entries recording purchase of assets. Od. They must be passed mandatorily for all accounts. Which of the following is true of the current ratio of a company? O a. It is useful in revealing a firm's ability to pay its bills. O b. It attempts to measure the overall strength of a firm. O c. It indicates the long-term financial strength of a firm. O d. It is determined by dividing current liabilities by current assets. Which of the following is true of a long-term liability? O a. It is recorded only in the year in which it is payable. O b. Its current portion is shown as a current liability. O c. It is always payable within one year. O d. Its balance is included in accounts payable