Response to the following questions:
1. Explain the calculation of net sales and net purchases.
2. In the closing procedure, what happens to (a) Purchases Discounts, (b) Sales Returns and Allowances, (c) Freight In, and (d) Gain on Disposal of Property and Equipment?
3. What are the rules for recognizing whether an adjusting entry should be reversed?
4. What two measures are used to determine whether a firm has sufficient capital to operate and whether the firm has the ability to pay its debts?