Book 2 - Chapter 23

Multiple Choice
1.	d	2. a	3. b
4.	b Cost of goods sold will be understated, so net income will overstated. Also, inventory should be $1,000 less, so current assets are overstated. (Use the accounting equation to visualize.)
5.	b	6. a
7.	c Because when more merchandise is purchased than can be sold, the inventory increases.
8.	b	9. a	10. c
11.	c (Did you remember to visualize by using the accounting equation?)
	Error: A = L + OE
	Correct: A = L + OE

Reinforcement Problems

LG 23-1.

Multiple-step format:

Kutztown Company Income Statement For the Year Ended December 31, 2008
Sales revenue			$294,000
Less: Sales returns and allowances		$2,550
Sales discounts		3,900	6,450
Net sales revenue			287,550
Cost of goods sold			112,870
Gross profit			174,680
Operating expenses
Selling expenses
Salaries and wages expense	$55,500
Advertising expense	3,500
Freight-out	370
Total selling expenses		59,370
Administrative expenses
Rent expense	26,000
Depreciation expense	7,500
Insurance expense	5,000
Utilities expense	4,850
Total administrative expenses		43,350
Total operating expenses			102,720
Operating income			71,960
Other income
Interest revenue		300
Other expense
Interest expense		1,700	1,400
Net income

Learning Goal 23

SOLUTIONS

Learning Goal 23: Complete the Period-End Procedures—Perpetual Method

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