Question 1

Richard has in his warehouse some raw materials and finished goods that he has ready to fill customer orders.  These are two types of  _____.
A) accounts payable.
B) accounts receivable.
C) cost of goods.
D) inventories.

Accepted Answer

Raw materials and finished goods are inventory items. Accounts payable and accounts receivable are related to financial transactions with suppliers and customers, respectively. Cost of goods is an expense account that reflects the direct financial cost of producing a product.

Question 2

Martina invested her savings into her business when she started it.  Later she added more capital and she has kept some of her profits.  Together these are known as:
A) debt capital.
B) accrued expenses.
C) owners' long-term debt.
D) owners' equity.

Accepted Answer

Martina's initial investment, additional capital, and retained profits are all considered owners' equity, which represents the portion of the company that is owned by its shareholders. Debt capital (A) refers to money borrowed from creditors, accrued expenses (B) are liabilities that have been incurred but not yet paid, and owners' long-term debt (C) is a specific form of owners' equity that represents long-term loans made by owners to the company.

Question 3

The debts that Rhonda's company will repay within the next ______________ are considered to be current debt.
A) 2 years
B) 6 months
C) 1 quarter
D) 12 months

Accepted Answer

Current debt is generally considered to be debts that are due and payable within 12 months.

Question 4

The items on the income statement are expressed in dollars but the corresponding margins are expressed as:
A) incomes.
B) expenses.
C) profits.
D) percentages.

Accepted Answer

Margins are expressed as percentages, not dollars. They show what portion of each dollar in revenue is leftover after accounting for certain costs.

Question 5

For Webster to understand how his company performed during calendar year 2012, he must begin with firm's financial position on:
A) January 1, 2012.
B) July 1, 2013.
C) September 30, 2010.
D) June 30, 2011.

Accepted Answer

The answer of For Webster to understand how his company...

Question 6

A two year-old asset has a depreciable life of 10 years. Its initial purchase cost was $450,000 and it is depreciated by 10 percent annually. What is the remaining depreciable value of the asset?
A)     $ 0.00
B)   $90,000
C) $200,000
D) $360,000

Accepted Answer

To find the remaining depreciable value of the asset, we need to first calculate the total accumulated depreciation. 
Each year, the asset depreciates by 10% of its initial cost, which is $45,000 ($450,000 x 0.10). So after two years, the total accumulated depreciation is:
$45,000 + $45,000 = $90,000.

The remaining depreciable value is simply the difference between the initial cost and the accumulated depreciation:
$450,000 - $90,000 = $360,000.

Therefore, the answer is D, $360,000.

Question 7

When Darla prepares her company's balance sheet, she should include ___________ in the list of current assets.
A) equipment.
B) land.
C) leased property.
D) accounts receivable.

Accepted Answer

Current assets are assets that can be easily converted into cash within one year. Accounts receivable are considered current assets because they represent money owed to the company that is expected to be collected within one year. Equipment, land, and leased property are all considered long-term assets and would not be included in the list of current assets.

Question 8

Ignatio applied for a loan for his business that he will repay in 9 months.  The best way to describe this loan is as a(n):
A) account payable.
B) accrued expense.
C) short-term note.
D) long-tern debt.

Accepted Answer

A loan that will be repaid in 9 months is considered to be a short-term note, as it is a debt that will be paid within a year. Options A, B, and D are not appropriate descriptions for this type of debt.

Question 9

Stephanie ordered merchandise from one of her vendors but she doesn't have to pay for it right away.  The amount of this purchase will increase Stephanie's:
A) accounts receivable
B) assets
C) balance sheet
D) accounts payable

Accepted Answer

Since Stephanie does not have to pay for the merchandise right away, she now owes the vendor money. This increases her accounts payable.

Question 10

Some assets don't seem to fit neatly into any category so accountants created a category called "other."  Which asset would considered an other asset?
A) Land
B) Machinery
C) Contingency funds
D) Goodwill

Accepted Answer

The answer of Some assets don't seem to fit neatly...

Question 11

Eugenia's company bought a delivery truck to deliver merchandise to customers.  This truck should appear as ___________ on the balance sheet.
A) a current asset
B) inventory
C) a fixed asset
D) a short-term investment

Accepted Answer

The delivery truck is a fixed asset, meaning it is a long-term asset that will be used in the operations of the company and not intended for sale in the near future. Current assets are assets that can be easily converted into cash within a year or less, inventory refers to goods that are held for sale, and short-term investments are investments that are highly liquid and easily tradable.

Question 12

Candace purchased a car for her company's exclusive use.  The value of this car:
A) is constant over time.
B) increases with each use of the asset.
C) decreases over time.
D) increases over time.

Accepted Answer

The value of a car decreases over time due to wear and tear, devaluation, and usage. Factors such as maintenance, age of the car, and mileage also contribute to its decrease in value. Therefore, the correct choice is C.

Question 13

Denver wants to make sure he puts his company's assets in the correct categories.  Which of the following is an example of a current asset?
A) Land
B) Inventories
C) Equipment
D) Buildings

Accepted Answer

Inventories are goods or products that a company currently holds for sale or is in the process of producing for sale. As such, they are considered a current asset. Land, equipment, and buildings are typically categorized as fixed assets, as they have a longer useful life and are not expected to be converted to cash within the current operating cycle of the business.

Question 14

XYC Corporation pays its taxes quarterly but withholds payroll taxes from its employees' paychecks each week.  Until the taxes are actually paid to the IRS, they appear on the balance sheet as:
A) an asset..
B) an account receivable.
C) a liability.
D) a long-term debt.

Accepted Answer

Payroll taxes withheld from employees' paychecks are considered a liability until they are paid to the IRS. This is because the company owes this money to the government and it is considered a debt until it is paid off. Once the taxes are paid, the liability will be reduced, and the company's cash account will decrease.

Question 15

The income statement answers which question?
A) How much cash did the firm generate?
B) How profitable was the business?
C) How much money does the company owe?
D) How much money did the owners invest?

Accepted Answer

The income statement shows the revenues, expenses, and net income of a business over a period of time, which indicates how profitable the business was during that period. It does not show how much cash the firm generated, how much money the company owes, or how much money the owners invested.

Question 16

Xavier wants to know how much his company owns and how much it owes.  He should look at the:
A) balance sheet.
B) income statement.
C) cash flow statement.
D) asset list.

Accepted Answer

The balance sheet shows a company's assets, liabilities, and equity, which provides insight into what a company owns (assets) and what it owes (liabilities). The income statement shows a company's revenue and expenses over a period of time, while the cash flow statement shows the inflows and outflows of cash during a period. An asset list is simply a list of a company's assets and does not provide information on its liabilities or equity.

Question 17

Buildings and machinery are considered to be
A) current assets.
B) fixed assets.
C) short-term assets.
D) other assets.

Accepted Answer

Buildings and machinery are considered to be fixed assets because they are long-term assets that are not expected to be converted into cash in the short-term.

Question 18

For investment purposes, Wilma needs a snapshot of the firm's financial position at a specific point in time.  She should look at the
A) marketing plan.
B) statement of cash flows.
C) balance sheet.
D) income statement.

Accepted Answer

For investment purposes, Wilma needs to see the financial position of the firm at a specific point in time. The balance sheet provides a snapshot of the firm's assets, liabilities, and equity at a specific point in time. It shows what the company owns, owes, and how much is left over for shareholders. The statement of cash flows shows the inflows and outflows of cash over a period of time, while the income statement shows the firm's revenues, expenses, and net income over a period of time. While both of these statements are important, for investment purposes, the balance sheet is most useful in determining the firm's financial position at a specific point in time.

Question 19

Raul needed an expensive piece of equipment to expand his business.  He borrowed the money from the bank and pledged the equipment as ___________.  If Raul does not repay the loan, the bank can take his equipment.
A) a promissory note
B) collateral
C) asset in escrow
D) long term debt

Accepted Answer

Collateral refers to the security or assets pledged by the borrower to the lender as a guarantee for repayment of a loan. In this case, Raul has pledged the expensive piece of equipment as collateral for the loan he has taken from the bank. This means that if he defaults on the loan, the bank can seize and sell the equipment to recover their funds. The other options are not suitable in this scenario - a promissory note is a written promise to pay a debt; asset in escrow refers to money or property held by a third party until conditions of an agreement are met; long-term debt is a liability that will be due in more than a year.

Question 20

Astoria is using a software application to prepare the balance sheet.  She wasn't sure which of the following should be included in the fixed asset category.  What would you tell her?
A) Land
B) Copyrights
C) Contingency funds
D) Goodwill

Accepted Answer

Land is a fixed asset as it is a long-term tangible asset that is held for the purpose of producing or renting goods or services. Copyrights, contingency funds, and goodwill, on the other hand, do not fall under the fixed asset category as copyrights are intangible assets, contingency funds are not used to generate revenues, and goodwill is an intangible asset that is only recognized when a company is acquired.

Quiz 10: Understanding a Firm S Financial Statements

Richard has in his warehouse some raw materials and finished goods that he has ready to fill customer orders. These are two types of _____.

Martina invested her savings into her business when she started it. Later she added more capital and she has kept some of her profits. Together these are known as:

The debts that Rhonda's company will repay within the next ______________ are considered to be current debt.

The items on the income statement are expressed in dollars but the corresponding margins are expressed as:

For Webster to understand how his company performed during calendar year 2012, he must begin with firm's financial position on:

A two year-old asset has a depreciable life of 10 years. Its initial purchase cost was $450,000 and it is depreciated by 10 percent annually. What is the remaining depreciable value of the asset?

When Darla prepares her company's balance sheet, she should include ___________ in the list of current assets.

Ignatio applied for a loan for his business that he will repay in 9 months. The best way to describe this loan is as a(n) :

Stephanie ordered merchandise from one of her vendors but she doesn't have to pay for it right away. The amount of this purchase will increase Stephanie's:

Some assets don't seem to fit neatly into any category so accountants created a category called "other." Which asset would considered an other asset?

Eugenia's company bought a delivery truck to deliver merchandise to customers. This truck should appear as ___________ on the balance sheet.

Candace purchased a car for her company's exclusive use. The value of this car:

Denver wants to make sure he puts his company's assets in the correct categories. Which of the following is an example of a current asset?

XYC Corporation pays its taxes quarterly but withholds payroll taxes from its employees' paychecks each week. Until the taxes are actually paid to the IRS, they appear on the balance sheet as:

The income statement answers which question?

Xavier wants to know how much his company owns and how much it owes. He should look at the:

Buildings and machinery are considered to be

For investment purposes, Wilma needs a snapshot of the firm's financial position at a specific point in time. She should look at the

Raul needed an expensive piece of equipment to expand his business. He borrowed the money from the bank and pledged the equipment as ___________. If Raul does not repay the loan, the bank can take his equipment.

Astoria is using a software application to prepare the balance sheet. She wasn't sure which of the following should be included in the fixed asset category. What would you tell her?