Chapter 5

Helpfulness: 0
Set Details Share
created 6 years ago by bmboyle
1,045 views
show moreless
Page to share:
Embed this setcancel
COPY
code changes based on your size selection
Size:
X
Show:
1

Which of the following is a limitation of the balance sheet?
A.
Many items that are of financial value are omitted.
B.
Judgments and estimates are used.
C.
Current fair values are not reported for many assets and liabilities.
D.
All of these

D.
All of these

2

The correct order to present current assets is
A.
Cash, accounts receivable, prepaid items, inventories.
B.
Cash, accounts receivable, inventories, prepaid items.
C.
Cash, inventories, accounts receivable, prepaid items.
D.
Cash, inventories, prepaid items, accounts receivable.

B.
Cash, accounts receivable, inventories, prepaid items.

3

Which of the following are acceptable balance sheet formats?
A.
Condensed form and report form.
B.
Multiple step form and account form.
C.
Condensed form and multiple step form.
D.
Report form and account form.

D.
Report form and account form

4

Which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure?
A.
Current assets
B.
Current liabilities
C.
Plant assets
D.
Long-term liabilities

D.
Long-term liabilities

5

Which of the following is not a major disclosure technique for the balance sheet?
A.
Notes.
B.
Parenthetical explanations.
C.
Supporting schedules.
D.
Worksheets.

D.
Worksheets.

6

The financial statement which summarizes the operating, investing, and financing activities of an entity for a period of time is the
A.
retained earnings statement.
B.
income statement.
C.
statement of cash flows.
D.
statement of financial position.

C.
statement of cash flows.

7

Making and collecting loans and disposing of property, plant, and equipment are
A.
operating activities.
B.
investing activities.
C.
financing activities.
D.
liquidity activities.

B.
investing activities.

8

The issuance of stock and the payment of dividends are
A.
operating activities.
B.
investing activities.
C.
stock activities.
D.
financing activities.

D.
financing activities.

9

The current cash debt coverage ratio is often used to assess
A.
financial flexibility.
B.
liquidity.
C.
profitability.
D.
solvency.

B.
liquidity.

10

The balance sheet is useful for analyzing all of the following except
A.
liquidity.
B.
solvency.
C.
profitability.
D.
financial flexibility.

C.
profitability.

11

The basis for classifying assets as current or non-current is the period of time normally required by the accounting entity to convert cash invested in
A.
inventory back into cash, or 12 months, whichever is shorter.
B.
receivables back into cash, or 12 months, whichever is longer.
C.
tangible fixed assets back into cash, or 12 months, whichever is longer.
D.
inventory back into cash, or 12 months, whichever is longer

D.
inventory back into cash, or 12 months, whichever is longer.

12

Which of the following balance sheet formats lists the assets on the left side of the page and the liabilities and stockholders' equity on the right side?
A.
Single step form.
B.
Account form.
C.
Multiple step form.
D.
Report form.

B.
Account form.

13

Which of the following facts concerning fixed assets should be included in the summary of significant accounting policies?
Depreciation Method Composition
A. No Yes
B. Yes Yes
C. Yes No
D. No No

C.
Yes No

14

A generally accepted account title is
A.
Prepaid Revenue.
B.
Appropriation for Contingencies.
C.
Earned Surplus.
D.
Reserve for Doubtful Accounts.

B.
Appropriation for Contingencies.

15

The statement of cash flows provides answers to all of the following questions except
A.
Where did the cash come from during the period?
B.
What was the cash used for during the period?
C.
What is the impact of inflation on the cash balance at the end of the year?
D.
What was the change in the cash balance during the period?

C.
What is the impact of inflation on the cash balance at the end of the year?

16

Cortex Corporation reports:
Cash provided by operating activities $1,150,000
Cash used by investing activities 320,000
Cash used by financing activities 110,000
Beginning cash balance 170,000

What is Cortez's ending cash balance?
A.
$720,000.
B.
$890,000.
C.
$1,530,000.
D.
$1,750,000.

$170,000 plus $1,150,000 less $320,000 less $110,000 equals $890,000, the ending balance of cash

17

Rover Corporation reports the following information:
Net income $2,500,000
Depreciation expense 340,000
Loss on the sale of investments 77,000
Increase in accounts receivable 160,000

Rover should report cash provided by operating activities of
A.
$1,923,000.
B.
$2,500,000.
C.
$2,757,000.
D.
$3,077,000.

$2,500,000 plus $340,000 plus $77,000 less $160,000 equals $2,757,000, the cash provided by operating activities.

18

Nirvana Corporation reports the following information:
Net cash provided by operating activities $215,000
Average current liabilities 150,000
Average long-term liabilities 100,000
Dividends paid 60,000
Capital expenditures 110,000
Purchase of treasury stock 11,000
Payments of debt 35,000

Nirvana's free cash flow is
A.
$10,000.
B.
$45,000.
C.
$105,000.
D.
$155,000.

Net cash provided by operating activities, $215,000, less capital expenditures, $110,000, less dividends paid, $60,000 equals a free cash flow of $45,000.

19

Which of the following statements about the balance sheet is incorrect?
A.
It reports the assets, liabilities, and equity of a company for a period of time.
B.
It is sometimes referred to as the statement of financial position.
C.
It provides information about the nature and amounts of investments in resources, obligations to creditors, and the owners' equity.
D.
It helps in predicting the amounts, timing, and uncertainty of future cash flows.

A.
It reports the assets, liabilities, and equity of a company for a period of time.

20

Major limitations of the balance sheet include all of the following except:
A.
most assets and liabilities are stated at historical cost.
B.
judgments and estimates are used in determining many of the items reported.
C.
it necessarily omits many items that are of financial value but cannot be recorded objectively.
D.
only amounts known with certainty are reported.

D.
only amounts known with certainty are reported.

21

Current assets are presented in the balance sheet in order of:
A.
dollar amounts.
B.
liquidity.
C.
solvency.
D.
the alphabet.

B.
liquidity.

22

Which of the following investments should always be reported as current assets?
A.
Available-for-sale securities.
B.
Held-to-maturity securities.
C.
Long-term investments.
D.
Trading securities.

D.
Trading securities.

23

All of the following would be classified as current liabilities at December 31, 2012 except:
A.
accrued warranty costs.
B.
advances received from customers.
C.
current portion of long-term debt.
D.
note payable due January 1, 2014.

D.
note payable due January 1, 2014.

24

All of the following are stockholders' equity sections reported in the balance sheet except:
A.
additional paid-in-capital.
B.
capital stock.
C.
retained earnings.
D.
dividends.

D.
dividends.

25

The balance sheet format listing liabilities and stockholders' equity directly below assets is called the:
A.
account form.
B.
financial position form.
C.
report form.
D.
solvency form.

C.
report form.

26

Which of the following is not a type of information that is supplemental to amounts presented in the balance sheet?
A.
Accounting policies.
B.
Balance sheet format.
C.
Contingencies.
D.
Contractual situations.

B.
Balance sheet format.

27

Companies are not required to disclose information about:
A.
inventory cost flow methods.
B.
depreciation methods.
C.
the identity of all stockholders.
D.
the use of estimates.

C.
the identity of all stockholders.