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X Chapter 15-Financial Statements and Year-End Accounting for a Merchandising Business 351 In a multiple step income statement, operating expenses are subtracted from gross profit to comp a. income from operations. b. net income. d. net loss. C. other income. ANS: DIF: Easy OBJ: LO 15-1 MSC; AACSB Communication 4. Net sales minus cost of goods sold equals a. operating income. b. operating expenses. d. gross profit. C. other expenses. DIF: Easy ANS: OBJ: LO 15-1 5. Accumulated depreciation amounts are shown as deductions from the 2 cost of building and equipment accounts. b. accounts receivable account. C. accounts payable account. d. prepaid insurance account. ANS: DIF: Easy MSC: AACSB Communication OBJ: LO 15-2 MSC: AACSB Communication 6. A formal statement of the assets, liabilities, and owner's equity of a business at a specified date is known as a(n) balance sheet. 2. b. income statement. C. statement of profits and losses. d. statement of earnings. ANS: DIF: Easy OBJ: LO 15-3 MSC: AACSB Communication 7. Cash and all other assets that may be reasonably expected to be converted to cash or consumed within one year or the normal operating cycle of the business are classified as a. temporary investments. b. marketable securities. C. current assets. d. investments. ANS: DIF: Easy OBJ: LO 15-3 MSC: AACSB Communication 8. Assets that are used for several years in the operation of a business are called a. marketable securities. b. current assets. c. investments. d. property, plant, and equipment. (Fixed Assets) ANS: DIF: Easy OBJ: LO 15-3 MSC: AACSB Communication