Question 1

ROA is computed as:
A) Net income / Average stockholders' equity
B) Earnings without interest expense (EWI)/ Average total assets
C) Profit margin × Asset turnover
D) B or C

Accepted Answer

ROA is return on assets. It can be disaggregated into profit margin and asset turnover components to provide insight into performance drivers that capture profitability and efficiency.

Question 2

The chart of accounts is also known as the book of original entry.

Accepted Answer

The general journal is also known as the book of original entry.

Question 3

If Camrey's Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as unearned revenue?
A) $ 90,000
B) $216,000
C) $ 64,000
D) $ 98,000

Accepted Answer

Unearned revenue represents the amount collected in advance that the company has not yet earned.

Question 4

Companies may not report internally created assets, such as the value of a successful marketing campaign, design innovations and a highly motivated work force on their balance sheets.

Accepted Answer

Even though these "assets" probably provide future benefits to the company that will be reflected in the company's market value and in future revenues, these amounts cannot be reliably measured. They are excluded from the balance sheet under GAAP.

Question 5

Inventory
A) Current assets
B) Long-term investments
C) Long-term assets
D) Intangible assets
E) Current liabilities
F) Noncurrent liabilities
G) Equity
H) item should not appear on the balance sheet

Accepted Answer

Inventory is classified as a current asset on the balance sheet because it is expected to be sold or used within one year or the operating cycle, whichever is longer.

Question 6

Land
A) Current assets
B) Long-term investments
C) Long-term assets
D) Intangible assets
E) Current liabilities
F) Noncurrent liabilities
G) Equity
H) item should not appear on the balance sheet

Accepted Answer

Land is classified as a long-term asset on the balance sheet because it is a resource owned by a company expected to provide benefits for more than one year.

Question 7

Building
A) Current assets
B) Long-term investments
C) Long-term assets
D) Intangible assets
E) Current liabilities
F) Noncurrent liabilities
G) Equity
H) item should not appear on the balance sheet

Accepted Answer

Building is considered a long-term asset because it is expected to provide economic benefits to the company for more than one year.

Question 8

Note receivable due in 30 days
A) Current assets
B) Long-term investments
C) Long-term assets
D) Intangible assets
E) Current liabilities
F) Noncurrent liabilities
G) Equity
H) item should not appear on the balance sheet

Accepted Answer

A note receivable due in 30 days is considered a current asset because it is expected to be converted into cash within one year or the operating cycle, whichever is longer.

Question 9

Accounts receivable
A) Current assets
B) Long-term investments
C) Long-term assets
D) Intangible assets
E) Current liabilities
F) Noncurrent liabilities
G) Equity
H) item should not appear on the balance sheet

Accepted Answer

Accounts receivable are considered current assets because they are usually expected to be converted into cash within a year or the operating cycle, whichever is longer.

Quiz 2: Categorizing Inventory on the Balance Sheet

ROA is computed as:

The chart of accounts is also known as the book of original entry.

If Camrey's Trucks makes the appropriate adjusting entry, how much will be reported on the December 31, 2016 balance sheet as unearned revenue?

Companies may not report internally created assets, such as the value of a successful marketing campaign, design innovations and a highly motivated work force on their balance sheets.

Inventory

Land

Building

Note receivable due in 30 days

Accounts receivable