Financial Statements Exercises & Problems

1. The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the: A. Income statement B. Owner’s equity statement. C. Balance sheet. D. Statement of cash flow.

2. The financial statement that reports assets, liabilities, and owner’s equity is the: A. Income statement B. Owner’s equity statement. C. Balance sheet. D. Statement of cash flow.

3. Another name of the balance sheet is: A. Statement of operations B. Owner’s equity statement. C. Statement of financial position D. Statement of cash flow. 4. Assets are reported on the financial statement known as the: A. Income statement B. Owner’s equity statement C. Balance sheet D. Statement of cash flow

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5. The financial statement that reports the components of a company's earnings is the: A. Statement of cash flow B. Owner’s equity statement C. Balance sheet D. Income statement 6. An asset that generally will turn to cash or will be used up within one year of the balance sheet date is called: A. Fixed Asset B. Property, plant, and equipment C. Current Asset D. Long term asset 7. A resource that has future economic value describes an: A. Expense B. Liability C. Revenue D. Asset 8. An obligation due within one year of the balance sheet date is a generally called: A. Long term liability B. Owner’s equity C. Short term liability D. Long term asset 9. Balance sheet accounts are known as: A. Temporary accounts B. Nominal accounts C. Short term accounts D. Permanent accounts

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10. Income statement accounts are known as: A. Temporary accounts B. Nominal accounts C. Short term accounts D. Permanent accounts 11. The main revenue account of a retail store is: A. Other revenue account B. Purchases account C. Sales account D. discount account 12. Sales minus the cost of goods sold equals: A. Net profit B. Gross profit C. Operating profit D. Total profit 13. Sales minus 1) Sales Discounts, and 2) Sales Returns and Allowances equals: A. Gross sales B. Total sales C. Net sales D. Operating sales 14. The cost of goods sold is the cost of goods available minus the costs in: A. Ending inventory B. Gross inventory C. Beginning inventory D. Net inventory

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15. Generally, a merchandiser's largest expense on its income statement is the: A. Administrative expenses B. Cost of goods sold C. Other expenses D. Selling expenses

16. Revenue and expense accounts are which type of accounts? A. Permanent accounts B. Real accounts C. Temporary accounts D. Long term accounts

17. The income statement heading of Other Revenue refers to: A. Operating revenues B. Selling revenues C. Gross revenues D. Non-operating revenues

18. The income statement of an economic entity reports: A. An excess of revenues over expenses as income B. An excess of expenses over revenue as income C. An excess of revenues over expenses as a loss D. An excess of expenses over revenues as equity

19. Financial statement items such as revenue, cost of goods sold, and administrative expenses are normally found in : A. Statement of cash flow B. Owner’s equity statement C. Balance sheet D. Income statement 4

20. Financial statement items such as cash, building, and account payable are normally found in: A. Statement of cash flow B. Owner’s equity statement C. Balance sheet D. Income statement 21. The elements of an income statement include: A. Revenues, assets, expenses, liabilities, and owner’s equity B. Revenues, liabilities and expenses C. Expenses, revenues, and owner’s equity D. Revenues, expenses, gross profit, and net income

22. The customary presentation of assets in a balance sheet is by: A. Size of the balance B. Nearness of the maturity date C. Likelihood of collection D. Degree liquidity

23. Fixed assets (Non-current) include: A. Cash, inventory, equipment B. Cash, bank, and account receivables C. Marketable securities, inventory, note receivables D. Buildings, equipments, and land 24. The shareholder’s equity section of a company’s balance sheet includes: A. Long-term liabilities B. Capital C. Fixed assets D. Current assets 5

25. This account does not appear on the income statement: A. Accumulated depreciation B. Depreciation expense C. Sales revenue D. Marketing expense

26. The elements of balance sheet include: A. Assets, liabilities, and income B. Cash flows, liabilities, and equity C. Assets, liabilities, and equity D. Assets, cash flows, and equity 27. Which of the following relationships is true in every balance sheet, regardless of its format? A. Assets + Equity = Liabilities B. Assets – Liabilities = Equity. C. Cash flows + Liabilities = Equity D. Income + Liabilities = Assets

28. The balance sheet of an entity reports: A. Assets, which are the entity’s obligations to others. B. Liabilities, which are the entity’s property rights. C. Assets, liabilities, and equity D. Income

29. Which list places assets in order of liquidity, from most liquid to least liquid? A. Buildings, inventory, accounts receivable B. Accounts receivable, cash, inventory, land C. Inventory, equipment, accounts receivables. D. Cash, accounts receivable, inventory, equipment

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30. The principal financial statements of an entity are (is): the Statement of: A. Balance sheet B. Statement of cash flows C. Income statement D. Income statement and balance sheet

31. The financial statement or statements that pertain to a specific date is (are) the: A. Balance sheet B. Income statement C. Balance sheet and income statement D. None of the above

32. Which of the following accounts is not a temporary account? A. Sales revenues B. Capital C. Loss on sale of equipment D. Interest expense

33. If an entity’s revenues are greater than its expenses in an accounting period, then: A. Its net income will be closed to equity, and equity will increase. B. Its net loss will be closed to equity, and equity will increase. C. Its net income will be closed to equity, and equity will decrease. D. Its net loss will be closed to equity, and equity will decrease.

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34. Fixed assets (non-current ) provides benefits: A. That will be realized in cash in the next 6-12 months B. In future years, but not in the current year C. In future years in addition to the current year D. Only when they are sold for cash

Use the following information to answer questions 35-52. Kuwait’s Company Trail Balance 31/12/2012 Debit 50,000

Account Name Cash Sales Sales returns & allowance 30,000 Sales discount 15,000 Purchases 91,000 Purchase returns & allowance Purchase discount Purchase delivery expenses (transportation-in) 20,000 Beginning inventory 35,000 Sales delivery expenses (transportation-out) 9,500 Administrative expenses 8,500 Interest revenue Land 100,000 Buildings 50,000 Equipments 40,000 Account receivables 35,000 Note payables Account payables Long-term loans Withdrawals 2,500 Interest expenses 1,000 Advertising expenses 7,500 Note receivables 55,000 Short-term loans Capital Total 550,000 At the closing date, the ending inventory was K.D. 25,000

Credit 250,000

25,000 12,000

4,000

7,000 11,000 33,000

8,000 200,000 550,000

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35. On December 31, net sales are equal to: A. K.D. 220,000 B. K.D. 205,000 C. K.D. 250,000 D. K.D. 295,000

36. On December 31, net purchases are equal to : A. K.D 34,000 B. K.D. 54,000 C. K.D. 74,000 D. K.D. 148,000

37. On December 31, cost of goods available for sale is equal to: A. K.D 109,000 B. K.D. 39,000 C. K.D. 89,000 D. K.D183,000 38. On December 31, cost of goods sold is equal to: A. K.D 74,000 B. K.D. 84,000 C. K.D. 100,000 D. K.D 109,000 39. On December 31, gross profit is equal to: A. K.D 124,000 B. K.D. 144,000 C. K.D. 121,000 D. K.D 134,000

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40. On December 31, total selling expenses are equal to: A. K.D 8,500 B. K.D. 9,500 C. K.D. 15,000 D. K.D 18,000

41. On December 31, total general and administrative expenses are equal to: A. K.D 15,000 B. K.D. 18,000 C. K.D. 8,500 D. K.D 9,500 42. On December 31, total operating expenses are equal to: A. K.D 23,500 B. K.D. 33,000 C. K.D. 26,500 D. K.D 27,500

43. On December 31, net profit from operating activities are equal to: A. K.D. 103,000 B. K.D. 94,500 C. K.D. 112,500 D. K.D 147,500 44. On December 31, other revenues are equal to: A. K.D. 1,000 B. K.D. 2,500 C. K.D. 4,000 D. K.D 5,000

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45. On December 31, other expense are equal to: A. K.D. 5,000 B. K.D. 4,000 C. K.D. 2,500 D. K.D 1,000

46. On December 31, total current assets are equal to: A. K.D. 120,000 B. K.D. 140,000 C. K.D. 175,000 D. K.D 165,000

47. On December 31, total fixed assets are equal to: A. K.D. 100,000 B. K.D. 150,000 C. K.D. 190,000 D. K.D 225,000

48. On December 31, total assets are equal to: A. K.D. 220,000 B. K.D. 290,000 C. K.D. 355,000 D. K.D 390,000

49. On December 31, short-term liabilities are equal to: A. K.D. 59,000 B. K.D. 33,000 C. K.D. 26,000 D. K.D 35,000

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50. On December 31, long-term liabilities are equal to: A. K.D. 59,000 B. K.D. 33,000 C. K.D. 51,000 D. K.D 35,000

51. On December 31, owner’s equity is equal to: A. K.D. 298,500 B. K.D. 200,000 C. K.D. 296,000 D. K.D 301,000 52. On December 31, total liabilities and owner’s equity are equal to: A. K.D. 296,000 B. K.D. 322,000 C. K.D355,000 D. K.D 329,000

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The following is the trail balance of Gulf Industries Company: Use the following information to answer questions 53-59.

Account Name Cash Beginning Inventory Sales Sales Returns and Allowances Purchases Purchases Returns and Allowances Purchase Delivery Fees Rent Expenses Selling Expenses Prepaid Insurance Buildings Accumulated Depreciation - Buildings Account Receivable Account Payable Capital Total At the closing date, the ending inventory was 80,000

Debit 300,000 60,000

Credit

650,000 4000 200,000 3000 5000 25,000 15,000 28,000 100,000 60,000 34,000

771,000

8000 50,000 771,000

53. Net Sales: A. K.D. 650,000 B. K.D. 646,000 C. K.D 647,000 D. K.D 654,000 54. Cost of Goods Sold: A. K.D. 178,000 B. K.D. 188,000 C. K.D 180,000 D. K.D 182,000

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55. Gross Profit: A. K.D. 472,000 B. K.D. 458,000 C. K.D 467,000 D. K.D 464,000 56. Total operational Expenses: A. K.D. 25,000 B. K.D. 15,000 C. K.D 40,000 D. K.D 68,000 57. Net Profit: A. K.D. 447,000 B. K.D. 443,000 C. K.D 439,000 D. K.D 424,000 58. Current Asset: A. K.D. 300,000 B. K.D. 414,000 C. K.D 334,000 D. K.D 394,000 59. Owner’s Equity : A. K.D. 482,000 B. K.D. 484,000 C. K.D 424,000 D. K.D 474,000

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The following is the trail balance of Arab Industries Company. Use the following information to answer questions 60-75.

Account Name Sales Sales discount Sales Returns and allowances Beginning Inventory Purchases Transportation in Purchases Discount Purchases Returns and allowances Transportation out Rent Salaries Prepaid Advertising Expense Interests Revenue Accrued Salaries Expenses Interests Expenses Bank Account Receivable Note Receivable Equipments Accumulated Depreciation -- Equipments Cars Note Payable Account Payable Long term loan Capital Owner's withdraws Total Ending Inventory is 5000

Debit

Credit 84000

2000 2000 10000 53000 2000 3000 1000 1000 2000 6500 4000 3000 6000 2500 27000 11000 14000 32000 6000 19000 4000 6000 7000 71000 3000 191000

191000

60. Net Sales: A. K.D. 84,000 B. K.D. 82,000 C. K.D 90,000 D. K.D 80,000

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61. Cost of Goods Sold: A. K.D. 51,000 B. K.D. 54,000 C. K.D 56,000 D. K.D 55,000 62. Gross Profit: A. K.D. 33,000 B. K.D. 24,000 C. K.D 26,000 D. K.D 28,000 63. Selling Expenses: A. K.D. 1,000 B. K.D. 2,000 C. K.D 8,500 D. K.D 3,000 64. General & Administrative Expenses: A. K.D. 2,000 B. K.D. 6,500 C. K.D 3,000 D. K.D 8,500 65. Total Operational Expenses: A. K.D. 11,500 B. K.D. 8,500 C. K.D 9,500 D. K.D 10,500

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66. Total Other Expenses : A. K.D. 3,000 B. K.D. 2,500 C. K.D 5,500 D. K.D 6,500 67. Total Other Revenues : A. K.D. 3,000 B. K.D. 2,500 C. K.D 5,500 D. K.D 6,500 68. Net Profit: A. K.D. 15,000 B. K.D. 14,000 C. K.D 13,000 D. K.D 12,000 69. Current Assets: A. K.D. 52,000 B. K.D. 57,000 C. K.D 43,000 D. K.D 30,000 70. Fixed Assets: A. K.D. 51,000 B. K.D. 26,000 C. K.D 45,000 D. K.D 32,000

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71. Other Assets: A. K.D. 6,000 B. K.D. 19,000 C. K.D 10,000 D. K.D 4,000 72. Short-term Liabilities: A. K.D. 4,000 B. K.D. 6,000 C. K.D 10,000 D. K.D 7,000 73. Long-term Liabilities: A. K.D. 6,000 B. K.D. 4,000 C. K.D 7,000 D. K.D 10,000 74. Other Liabilities: A. K.D. 10,000 B. K.D. 4,000 C. K.D 7,000 D. K.D 6,000 75. Owner’s Equity : A. K.D. 83,000 B. K.D. 84,000 C. K.D 85,000 D. K.D 86,000

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