1- (a) If operations for an accounting period resulted in cash sales of $25,000, sales on account of $30,000, and expenses paid in cash of $50,000, did the business incur a net income or a net loss for the period?

(b) What is the amount of net income or net loss?

(c) If liabilities are $65,000 and owner’s equity is $35,000, the amount of the assets is:

(d) If assets are $205,000 and owner’s equity is $75,000, the amount of the liabilities is:

• 2- There are four steps that are involved in the closing process. What are the four journal entries that are required in closing the temporary accounts?

• 3- The following balance sheet data for Lester’s Company are shown below:

2011: Current Assets = $288,000; Current Liabilities = $120,000

2010: Current Assets = $171,000; Current Liabilities = $ 90,000

(a) Calculate the working capital for 2011 and 2010.

(b) Calculate the current ratio for 2011 and 2010.

• 4-During the current year, merchandise sold for $775,000. The cost of the merchandise sold was $426,250.

(a) What is the amount of gross profit?

(b) What is the gross profit percentage (gross profit divided by sales)?

• 5-(a) Who bears the freight when the terms of the sale are FOB shipping point?

(b) Who bears the freight when the terms of the sale are FOB destination?

• 6- The following items were available for sale during the year:

Beginning inventory ……………………………………. 10 units at $61

First purchase ……………………………………………… 40 units at $62

Second purchase …………………………………………. 35 units at $65

Third purchase ……………………………………………. 15 units at $63

(a) Based on the periodic system, the total cost of the 23 units in inventory at the end of the year, according to the first-in, first-out (FIFO) method is:

(b) Based on the data, the total cost of the 23 units in inventory for the last-in, first-out (LIFO) method is:

7-Merchandise inventory is reported on which financial statement and in what section?