1. d. Correct. The income statement shows revenues first, then all expenses are listed and subtracted from the revenues to arrive at net income. See page 111.
2. c. Correct. Revenues of a company increase retained earnings while expenses and owner’s withdrawals decrease retained earnings. Owner's investments affect contributed capital not retained earnings. See page 111.
3. b. Correct. Revenues should be recorded when they have been earned. Usually, revenue is earned when an exchange has taken place that means that the earning process has been substantially completed. See page 111.
4. a. Correct. The matching principle refers to recording (matching) all expenses incurred to earn the revenue in the same accounting period. See page 112.
5. b. Correct. The revenues and expenses for the income statement come from the retained earnings column of the accounting transaction worksheet. The retained earnings column of the accounting transaction worksheet also contains owner’s withdrawals but these do not go on the income statement. See pages 112-114.
6. d. Correct. See pages 114-115.
7. b. Correct. There were two revenues recorded during September, $2,200 and $4,000, totaling $6,200. See pages 112-114.
8. c. Correct. There were five expenses, all listed in the column totaling $5,600. Note that owner’s withdrawal is not an expense even though it reduces retained earnings. See pages 112-114.
9. a. Correct. Net income is revenue less expenses, $600 ($6,200 less $5,600). See pages 112-114.
10. d. Correct. The ending retained earnings on the accounting transaction worksheet will be the amount of the retained earnings on the balance sheet, $7,900. See pages 112-114.
11. b. Correct. Revenues of $16 less $15 of expenses gives $1 of net income. Retained earnings and contributed capital are not part of the net income computation. See pages 112-114.
12. d. Correct. The ending retained earnings would be the beginning retained earnings of $25 plus net income of $1, giving $26 as the ending retained earnings. See pages 112-114.