Week 5 - Statement of Comprehensive Income Part II

Question 1

These accounts in the income statement reflect the inflows and outflows of
resources within the firm and their relationship is an indicator of how
successful the business operation was for a given period. The story of the
success, or failure, of operations is shown in the statement of income

Answer 1

R

Question 2

The above income statement is prepared using a _______
because after getting the totals of revenue and expense items, the difference
was arrived at by simply subtracting the two

Answer 2

single-step approach

Question 3

A _____ income statement is one of two commonly used formats for
the income statement or profit and loss statement. The _____ format
uses only one subtraction to arrive at net income.

Answer 3

single-step

Question 4

It is also to be noted from the above report that the heading of a statement of
income usually consists of the following

Answer 4

 Business name
 Statement of income
 Period covered by the statement

Question 5

The _____ segregates the operating
revenues and operating expenses from the no operating revenues, no
operating expenses, gains, and losses

Answer 5

multiple-step profit and loss statement

Question 6

The ____
also shows the gross profit (net sales minus the cost of goods sold).

Answer 6

multiple-step income statement

Question 7

The income statement for merchandising businesses usually has seven
sections:

Answer 7

 Net sales
 Cost of goods sold
 Gross profit
 Operating expenses
 Operating income or operating loss
 Other revenues and gains (expenses and losses)
 Net profit or net loss

Question 8

________ income statement clearly states the gross profit amount. Many
readers of financial statements monitor a company’s gross margin (gross profit
as a percentage of net sales). Readers may compare a company’s gross margin to
its past gross margins and to the gross margins of the industry

Answer 8

Multiple-step

Question 9

The _________ income statement presents the subtotal operating income,
which indicates the profit earned from the company’s primary activities of
buying and selling merchandise.

Answer 9

Multiple step

Question 10

The bottom line of a _______ income statement reports the net amount for
all the items on the income statement. If the net amount is positive, it is labeled
as net income. If the net amount is negative, it is labeled as net loss

Answer 10

Multiple step

Question 11

The bottom line of a multiple-step income statement reports the net amount for
all the items on the income statement. If the net amount is positive, it is labeled
as net income. If the net amount is negative, it is labeled as

Answer 11

Net loss

Question 12

refer to total or gross sales less any sales discounts, and sales
returns and allowances.

Answer 12

Net sales

Question 13

reductions in the total sales price given to the customer if
the account will be paid within a short period of time. Assuming the credit
term is 1/10, n/30, the customer will be given a 1% discount if payment is
received within 10 days from the invoice date. Assuming total credit sales of
₱50,000 was made on September 1 and the customer paid on or before
September 11, an amount of ₱5,000, representing 1% of ₱50,000, will be
deducted from the total amount due.

Answer 13

Sales discounts

Question 14

reductions in the total selling price.
Sales returns represent the actual price of returned merchandise by the
customer; sales allowances are reductions in the price because of possible
defects or damages in the products sold.

Answer 14

Sales returns and allowances

Question 15

actual cost of the merchandise sold. It is the sum of
the cost of merchandise in the beginning inventory plus the net cost of goods
purchased this period less the merchandise in the ending inventory.

Answer 15

Cost of goods sold

Question 16

represents the total amount of inventory on hand.

Answer 16

Merchandise inventory

Question 17

the amount of inventory at the beginning of the period
and ending inventory is the amount remaining at the end of the period.

Answer 17

Beginning inventory

Question 18

the total or gross purchases less any purchase
discounts and purchase returns and allowances

Answer 18

Net cost of goods purchased

Question 19

cash discounts representing reductions in the
purchase price because the buyer settled the account within the credit term.

Answer 19

Purchase discounts

Question 20

deducted in the purchase price either
because of returns or reductions due to defects or damages of goods
purchased.

Answer 20

Purchase returns and allowances

Question 21

main difference on the income between a Service and Merchandising business is that revenue of
service business comes from fees on rendered services while the income of a merchandising business comes from
sales of the products>

Answer 21

R

Question 22

______ = Beginning inventory + Net cost of goods purchased – Ending inventory

Answer 22

Cost of goods sold

Question 23

refer to total or gross sales less any sales discounts, and sales returns and
allowances.

Answer 23

Net sales

Question 24

reductions in the total sales price given to the customer if the
account will be paid within a short period of time

Answer 24

Sales discounts

Question 25

represent the actual price of returned merchandise by
the customer; sales allowances are reductions in the price because of possible defects or
damages in the products sold.

Answer 25

Sales return and allowances

Question 26

actual cost of the merchandise sold. It is the sum of the cost of
merchandise in the beginning inventory plus the net cost of goods purchased this period
less the merchandise in the ending inventory.

Answer 26

Cost of goods sold

Question 27

represents the total amount of inventory on hand.

Answer 27

Merchandise inventory

Question 28

the amount of inventory at the beginning of the period and
ending inventory is the amount remaining at the end of the period

Answer 28

Beginning inventory

Question 29

total or gross purchases less any purchase discounts
and purchase returns and allowances

Answer 29

Net cost of goods purchased

Question 30

are cash discounts representing reductions in the purchase price
because the buyer settled the account within the credit term.

Answer 30

Purchase discounts

Question 31

deducted in the purchase price either because of
returns or reductions due to defects or damages of goods purchased

Answer 31

Purchase returns and allowances