Ch4. Video 9 - Accounting Cycle for Merchandising Business Example Part 2

This video tutorial covers the process of creating an adjusted trial balance and financial statements, including the income statement, statement of retained earnings, balance sheet, and statement of cash flow. It emphasizes the importance of understanding the accounting cycle and provides detailed steps for each financial statement, highlighting key figures and calculations. The tutorial also explains the classification of operating and non-operating activities and their impact on financial statements.

What is the purpose of an adjusted trial balance?

• To determine the company's tax liability

• To list all accounts and their balances after adjustments

• To calculate net income

• To prepare the cash flow statement

In a multi-step income statement, what is subtracted from sales revenue to calculate net sales?

• Sales discounts and returns

• Operating expenses

• Cost of goods sold

• Interest expenses

What is the total operating income if net sales are $27,900 and operating expenses are $3,300?

• $24,600

• $10,500

• $30,000

• $13,800

Which of the following is considered a non-operating activity?

• Sales revenue

• Selling and admin expenses

• Cost of goods sold

• Gain on sale of land

Why are retained earnings initially zero for a new business?

• Because the business has no initial income

• Because the business has no beginning balances

• Because the business has no liabilities

• Because the business has no initial expenses

What must total assets equal on a balance sheet?

• Total liabilities and equity

• Total equity

• Total liabilities

• Total revenue

Which of the following is categorized under financing activities in the cash flow statement?

• Cash payment for inventory

• Cash payment for interest expense

• Cash received from customers

• Cash received from common stock

What is the net cash flow from operating activities if cash received from customers is $27,900 and cash payments for inventory and expenses total $26,540?

• $1,360

• $2,500

• $45,000

• $48,860

Why is interest expense categorized differently in the income statement and cash flow statement?

• To match tax reporting requirements

• Due to different accounting rules

• Because it is a non-cash item

• To simplify financial reporting

What is the ending cash balance if the net increase in cash is $48,860 and the beginning cash balance is zero?

• $57,750

• $12,750

• $48,860

• $0