Deck 3: The Balance Sheet and Financial Disclosures

Question 1

A company's market value is generally less than its book value.

Answer 1

False

Question 2

Accrued salaries and wages in a balance sheet represent salaries and wages that have been earned by employees but not yet paid.

Answer 2

True

Question 3

A payment on account has no effect on working capital but will increase the current ratio if it is already greater than 1.0.

Answer 3

True

Question 4

Liquidity refers to the riskiness of a company with regard to the amount of liabilities in its capital structure.

Question 5

All current assets are either cash or assets that will be converted into cash or consumed within 12 months or the operating cycle,whichever is longer.

Question 6

Segment reporting requires disclosure of each customer that accounts for more than 5% of total enterprise revenue.

Question 7

Assets classified as property,plant,and equipment include machinery,equipment,and inventories.

Question 8

Intangible assets usually are reported in the balance sheet as current assets.

Question 9

Horizontal analysis involves expressing each item in the financial statements as a percentage of an appropriate total,or base amount,within the same year.

Question 10

The compensation of top executives is disclosed in the proxy statement.

Question 11

Prepaid expenses are classified as current assets if the services purchased are expected to expire within 12 months or the operating cycle,whichever is longer.

Question 12

Payment terms,interest rates,and other details of long-term liabilities usually are reported in disclosure notes.

Question 13

Subsequent events are significant developments that take place after a firm's year-end,and after the financial statements are issued or available to be issued.

Question 14

Current assets include cash and all other assets expected to become cash or be consumed:

A)Within one year.
B)Within one operating cycle.
C)Within one year or one operating cycle,whichever is shorter.
D)Within one year or one operating cycle,whichever is longer.

Question 15

The balance sheet reports a company's financial position at a point in time.

Question 16

Illegal acts will only need to be disclosed if the impact of the act is material.

Question 17

The balance of net receivables represents the amount expected to be collected.

Question 18

The criteria for determining which items comprise cash equivalents often is disclosed in the summary of significant accounting policies.

Question 19

The balance sheet reports:

A)Net income at a point in time.
B)Cash flows for a period of time.
C)Assets and equities at a point in time.
D)Assets and liabilities for a period of time.

Question 20

The ultimate responsibility for the financial statements lies with the auditors.

Question 21

Which is a shareholders' equity account in the balance sheet?

A)Accumulated depreciation.
B)Paid-in capital.
C)Salaries payable.
D)Accounts receivable.

Question 22

Accrued liabilities:

A)Are generally paid in services rather than cash.
B)Result from payment before services are received.
C)Result from services received before payment.
D)Are deferred charges to expense.

Question 23

Janson Corporation Co.'s trial balance included the following account balances at December 31,2016:

Investments consist of treasury bills that were purchased in November and mature in January.Prepaid insurance is for the next two years.What amount should be included in the current asset section of Janson's December 31,2016,balance sheet?

A)$ 88.000.
B)$ 85,000.
C)$ 55,000.
D)$135,000.

Question 24

Cash equivalents would include:

A)Highly liquid equity securities.
B)Accounts receivable from a financial institution.
C)Restricted funds for bonds that mature in three years.
D)Debt instruments with maturity dates of less than three months from the date of the purchase.

Question 25

Janson Corporation Co.'s trial balance included the following account balances at December 31,2016:

What amount should be included in the current liability section of Janson's December 31,2016,balance sheet?

A)$ 63,000.
B)$ 41,000.
C)$ 61,000.
D)$101,000.

Question 26

Notes payable that are due in two years are:

A)Current liabilities.
B)Long-term intangible assets.
C)Long-term liabilities.
D)Long-term investments.

Question 27

An asset that is generally not expected to be converted to cash or consumed within one year or the operating cycle is:

A)Building.
B)Accounts receivable.
C)Inventory.
D)Supplies.

Question 28

Use the following to answer questions
Listed below are year-end account balances (in $millions)taken from the records of Symphony Stores.

What is the amount of working capital for Symphony?

A)$ 98.
B)$143.
C)$128.
D)$113.

Question 29

Long-term solvency refers to:

A)The efficiency with which a company manages its resources.
B)The profitability of a company for a period of time.
C)The amount of current assets relative to long-term assets.
D)The riskiness of a company with regard to the amount of liabilities in its capital structure.

Question 30

New Oaks Winery requires two months to make wine,two years to age it,one month to bottle it,two months to sell it,and one month to collect the receivable.Its operating cycle is:

A)Twelve months.
B)Thirty months.
C)Six months.
D)Three months.

Question 31

Use the following to answer questions
Listed below are year-end account balances (in $millions)taken from the records of Symphony Stores.

What would Symphony report as total assets?

A)$2,338.
B)$2,323.
C)$2,318.
D)$2,303.

Question 32

Rent collected in advance is:

A)An asset account in the balance sheet.
B)A liability account in the balance sheet.
C)A shareholders' equity account in the balance sheet.
D)A temporary account,not in the balance sheet at all.

Question 33

Assets do not include:

A)Property,plant,and equipment.
B)Investments.
C)Paid-in capital.
D)Unexpired insurance.

Question 34

Which of the following is never a current liability account?

A)Accrued payroll.
B)Dividends payable.
C)Prepaid rent.
D)Subscriptions collected in advance from customers.

Question 35

Use the following to answer questions
Listed below are year-end account balances (in $millions)taken from the records of Symphony Stores.

What would Symphony report as total shareholders' equity?

A)$323.
B)$808.
C)$838.
D)$928.

Question 36

The usual difference between accounts payable and notes payable is:

A)Legally enforceable debt.
B)Current-noncurrent classification.
C)Known payment terms.
D)Explicitly stated interest.

Question 37

Long-term assets generally include:

A)Inventory held for sale.
B)Prepaid rent.
C)Accounts receivable.
D)Land held for a possible future plant site.

Question 38

Red Onion Restaurant would classify a six-month prepaid insurance policy as:

A)Property,plant,and equipment.
B)Investment.
C)Current asset.
D)Goodwill.

Question 39

Use the following to answer questions
Listed below are year-end account balances (in $millions)taken from the records of Symphony Stores.

What would Symphony report as total current assets?

A)$823.
B)$838.
C)$843.
D)$1,696.

Question 40

Cash equivalents would not include:

A)Cash not available for current operations.
B)Money market funds.
C)U.S.treasury bills.
D)Bank drafts.

Question 41

The final paragraph of the audit report:

A)Provides the auditors' opinion on the fairness of the financial statements.
B)Provides the auditor's opinion on the effectiveness of internal control.
C)Describes the scope of the audit.
D)States management's responsibility for the financial statements.

Question 42

The Management Discussion and Analysis section of the annual report can best be described as:

A)Frank but objective.
B)Independent but precise.
C)Legalistic and lengthy.
D)Biased but informative.

Question 43

An example of fraud would be:

A)Issuing a purchase order without first securing bids.
B)Buying raw materials from an affiliated company.
C)Knowingly classifying a material noncurrent receivable as a current receivable.
D)Forgetting to accrue salaries and wages payable.

Question 44

An exception that is so serious that even a qualified opinion is not justified would result in:

A)A disclaimer.
B)An unqualified opinion.
C)An adverse opinion.
D)A consistency exception.

Question 45

Disclosure notes would not include:

A)Depreciation methods used and estimated useful life.
B)Definition of cash equivalents.
C)Details of pension plans.
D)Data to adjust the financial statements so that they are not misleading.

Question 46

The acid-test ratio is also known as the:

A)Current ratio.
B)Debt to equity ratio.
C)Times interest earned ratio.
D)Quick ratio.

Question 47

When a company pays its bill from a plumber for previous services on account:

A)Its debt to equity ratio always decreases.
B)Its acid-test ratio always remains unchanged.
C)Its current ratio always remains unchanged.
D)Its return on shareholders' equity always decreases.

Question 48

Liquidity refers to:

A)The amount of cash on hand at a given time.
B)The readiness of an asset to be converted to cash.
C)The period until cash is used and refinancing becomes necessary.
D)Financial leverage.

Question 49

Lack of long-term solvency refers to:

A)Risk of nonpayment relative to liabilities in the capital structure.
B)The length of time before long-term debt becomes due.
C)The ability to refinance long-term debt when it becomes due.
D)Long-term assets.

Question 50

Which of the following is not a required disclosure for related-party transactions?

A)The nature of the relationship.
B)A description of the transactions.
C)The amounts due from or to related parties.
D)The impact of the transactions on current year's income.

Question 51

Which of the following would be disclosed in the summary of significant accounting policies disclosure note?

Question 52

A subsequent event for an entity with a December 31,2016,year-end would not include:

A)A change in the estimated useful lives of equipment in January 2017.
B)An issuance of bonds in January 2017.
C)An acquisition of another company in January 2017.
D)A major uncertainty at December 31,resolved in January 2017.

Question 53

When a company accrues federal income taxes at the end of the accounting period:

A)Its acid-test ratio increases.
B)Its current ratio increases.
C)Its debt to equity ratio decreases.
D)Its debt to equity ratio increases.

Question 54

The current ratio is calculated as:

A)Current assets divided by noncurrent assets.
B)Current assets divided by total assets.
C)Current assets divided by current liabilities.
D)Current assets divided by total liabilities.

Question 55

The quick ratio is:

A)The liquidity ratio divided by the equity ratio.
B)Current assets minus inventory divided by current liabilities minus accounts payable.
C)Current assets minus inventory and prepaid items divided by current liabilities.
D)Cash divided by accounts payable.

Question 56

Which of the following is not a financing ratio?

A)Times interest earned ratio.
B)Debt to equity ratio.
C)Current ratio.
D)Return on shareholders' equity.

Question 57

Working capital is equal to:

A)Current assets.
B)Current liabilities.
C)Current assets plus current liabilities.
D)Current assets minus current liabilities.

Question 58

How are management's responsibility and the auditors' opinion on internal controls represented in the standard auditor's report?

Question 59

An example of an error would be:

A)Purchasing inventory from a related party.
B)Counting an inventory item twice when taking a physical inventory.
C)Holding back invoices so that accounts payable are understated.
D)Receiving kickbacks in exchange for issuing a purchase order to a vender.

Question 60

The principal concern with accounting for related-party transactions is:

A)The size of the transactions.
B)Differences between economic substance and legal form.
C)The absence of legally binding contracts.
D)The lack of accurate data to record transactions.

Question 61

Use the following to answer questions
The following partial balance sheet ($ in thousands)for Paisano Seafood Inc.is shown below.
The acid-test ratio is (rounded):

A)0.25.
B)0.88.
C)1.17.
D)1.58.

Question 62

Listed below are 5 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 63

Use the following to answer questions
The following partial balance sheet ($ in thousands)for Paisano Seafood Inc.is shown below.
The current ratio is (rounded):

A)1.98.
B)1.58.
C)1.17.
D)0.66.

Question 64

Listed below are 5 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 65

Listed below are 5 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 66

The December 31,2016,post-closing trial balance ($ in thousands)for Libby Corporation is presented below:

Required: Prepare a classified balance sheet for Libby Corporation at December 31,2016.

Question 67

HHF's long-term debt to equity ratio equity is:

A)133.3%.
B)75%.
C)180%.
D)0%.

Question 68

Listed below are 5 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 69

Listed below are 5 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 70

Listed below are 5 terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 71

Which of the following is not a required segment reporting disclosure according to U.S.GAAP?

A)Segment profit or loss.
B)Segment assets.
C)Segment liabilities.
D)General information about the operating segment.

Question 72

Which of the following is not a characteristic that defines a reportable operating segment according to U.S.GAAP?

A)Operating results are regularly reviewed by the enterprise's chief operating officer.
B)Discrete financial information is available.
C)Engages in business activities from which it may recognize revenues and incur expenses.
D)Represents more than 20% of total company revenues,assets,or net income.

Question 73

Assume a company's liquidity ratios all are less than 1.0 before it purchases inventory on credit.When it makes the purchase:

A)Its current ratio decreases.
B)Its quick ratio decreases.
C)Its current ratio remains unchanged.
D)Its quick ratio remains unchanged.

Question 74

Use the following to answer questions
The following partial balance sheet ($ in thousands)for Paisano Seafood Inc.is shown below.
Working capital is:

A)$505.
B)$265.
C)$185.
D)$75.

Question 75

When a company sells land for cash and recognizes a $25,000 gain:

A)Its acid-test ratio decreases.
B)Its current ratio decreases.
C)Its debt to equity ratio decreases.
D)Cannot determine from the given information.

Question 76

Listed below are ten terms followed by a list of phrases that describe or characterize the terms.Match each phrase with the correct term.

Question 77

HHF's debt to equity ratio is (rounded):

A)0.75.
B)1.13.
C)0.53.
D)1.80.

Question 78

Use the following to answer questions
The following partial balance sheet ($ in thousands)for Paisano Seafood Inc.is shown below.
Quick assets total:

A)$60.
B)$230.
C)$280.
D)$305.

Question 79

HHF's times interest earned ratio is (rounded):

A)3.47.
B)1.73.
C)2.47.
D)10.0.

Question 80

Which of the following is not a required segment reporting disclosure according to International Financial Reporting Standards?

A)Segment profit or loss.
B)Segment assets.
C)Segment liabilities.
D)All are required disclosures.