1. Which of the following is the income statement expressed in equation form?

a. Revenues - Net income = Expenses.

b. Net income - Revenues = Expenses.

c. Expenses - Revenues = Net income.

d. Revenues - Expenses = Net income.

2. Which of the following statements is correct concerning retained earnings?

a. Expenses increase retained earnings.

b. Owner’s withdrawals increase retained earnings.

c. Revenues increase retained earnings.

d. Owner’s investments increase retained earnings.

3. The revenue recognition principle states that

a. revenue should be recorded only when cash is received.

b. revenue should be recorded when the earning process has been substantially completed.

c. revenue should be recorded when an expense has been incurred.

d. all cash receipts are revenues for the business.

4. The matching principle of accounting states that

a. all costs incurred in generating revenue be recognized in the same accounting period as the related revenue.

b. recorded expenses must be equal to recorded revenues for the accounting period.

c. assets must equal liabilities plus owner’s equity at all times.

d. net income and the increase in retained earnings for the accounting period must be equal.

5. Information in the income statement comes primarily from the

a. cash column of the accounting transaction worksheet.

b. retained earnings column of the accounting transaction worksheet.

c. ending balance sheet of the accounting period.

d. ending balance sheet and the statement of cash flows for the accounting period.

6. At the end of the accounting period, which two financial statements are sometimes combined into one financial statement?

a. Income statement and balance sheet.

b. Balance sheet and statement of cash flows.

c. Statement of cash flows and retained earnings.

d. Statement of retained earnings and income statement.

7. Presented below are selected columns from the accounting transaction worksheet of the McClung Company for September:

Based on the information above, McClung had total revenues earned during September 2000 of

a. $7,900.

b. $6,200.

c. $4,000.

d. $5,300.

8. Presented below are selected columns from the accounting transaction worksheet of the McClung Company for September:

Based on the information above, the McClung Company should report total expenses for September 2000 of

a. $300.

b. $6,500.

c. $5,600.

d. $7,900.

9. Presented below are selected columns from the accounting transaction worksheet of the McClung Company for September:

Based on the information above, for September 2000 the McClung Company should report

a. net income of $600.

b. net loss of $300.

c. net income of $7,900.

d. net loss of 1,500.

10. Presented below are selected columns from the accounting transaction worksheet of the McClung Company for September:

Based on the information above, in the September 30, 2000 balance sheet the McClung Company should report total retained earnings as

a. $8,200.

b. $6,200.

c. $16,100.

d. $7,900.

11. Madera Company has been in operation for 5 years. Following is selected data taken from the accounts of Madera Company. Use this data to determine the net income for its most recent year.

Based on the above information, the net income for Madera Company was

a. $16.

b. $1.

c. $21.

d. $6.

12. Madera Company has been in operation for 5 years. Following is selected data taken from the accounts of Madera Company for the most recent year.

Based on the above information, the ending retained earnings for the most recent year was

a. $45.

b. $25.

c. $36.

d. $26.