1. An income statement
a. summarizes the changes in stockholders' equity for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders' equity over a period of time.
c. reports the assets, liabilities, and stockholders' equity at a specific date.
d. presents the revenues and expenses for a specific period of time.

Use the following information for questions 2-3.
Sheepskin Company had the following transactions during 2008. • Sales of $4,500 on account • Collected $2,000 for services to be performed in 2009 • Paid $625 cash in salaries • Purchased airline tickets for $250 in December for a trip to take place in 2009 2. What is Sheepskin's 2008 net income using accrual accounting?
a. $3,875
b. $5,875
c. $5,625
d. $3,625

3. What is Sheepskin's 2008 net income using cash basis accounting?
a. $5,875
b. $1,375
c. $5,625
d. $1,125

4. The matching principle states that
a. expenses become costs when they expire.
b. liabilities should be matched against assets on the balance sheet.
c. expenses should be matched against the revenues they help generate.
d. costs should be expensed when paid. 5. The balance in the income summary account before it is closed will be equal to
a. the net income or loss on the income statement.
b. the beginning balance in the retained earnings account.
c. the ending balance in the retained earnings account.
d. zero.

6. Fall Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $880,000 at the end of the year. Net credit sales during the year amounted to $6,120,000. The receivables turnover ratio was
a. 7.2 times.
b. 7 times.
c. 6.9 times.
d. 6.8 times 7. On October 3, Carter Company, received a cash payment for services previously billed to a client. The Company