Question 1

Assets and liabilities are classified as either current or non-current to show their relative liquidity.

Accepted Answer

This statement is true. Assets and liabilities are typically classified as current or non-current on a company's balance sheet to reflect their relative liquidity. Current assets and liabilities are those that are expected to be either used up or paid within one year, while non-current assets and liabilities are expected to last for longer than one year.

Question 2

Below is a list of various balance sheet accounts and their balances. $$\begin{array} { | l | l | } 
\hline \text { Loan payable - short term } & \$ 1000 \
\hline \text { Salaries payable } & 4000 \
\hline \text { Loan payable -long term } & 21,000 \
\hline \text { Accounts payable } & 3300 \
\hline \text { Unearned revenue } & 2000 \
\hline \text { Interest payable } & 2500 \
\hline
\end{array}$$ What are the total non-current liabilities that would be shown on the balance sheet?

Accepted Answer

Non-current liabilities are obligations not due within the next year. The only non-current liability listed is the "Loan payable - long term" which is $21,000.

Question 3

Adkins Company has a current ratio of 1.0 and a debt ratio of 0.7.Wilson Company has a current ratio of 1.4 and a debt ratio of 0.5.Both companies are in the same industry.Which of the following statements is TRUE?

Accepted Answer

A higher current ratio indicates a company has more short-term assets to cover its short-term liabilities, which is generally viewed as positive. Wilson Company has a higher current ratio than Adkins Company, indicating it is in a better position to cover its short-term liabilities. A lower debt ratio indicates a company has less debt relative to its assets, which is also generally viewed as positive. Wilson Company also has a lower debt ratio than Adkins Company, indicating it is in a better position to manage its debt obligations. Therefore, Wilson Company appears to be in better financial shape than Adkins Company despite the fact that their debt ratios and current ratios vary in different directions.

Question 4

Below is a list of various balance sheet accounts and their balances. $\begin{array}{|l|l|l|}
\hline \text { Accounts } & {\text { Debit }}&\text { Credit } \\hline \text { Building } & \$ 120,000 \
\hline \text { Building } & \$ 130,000 \
\hline \text { Cash } & 7000 \
\hline \text { Supplies } & 1000 \
\hline \text { Furniture } & 6000 \
\hline \text { Prepaid insurance } & 4700 \\hline \text { Accumulated depreciation - furniture } & & \$ 950 \
\hline \text { Land } & 34,000 & \
\hline \text { Accumulated depreciation - building } & & 4700 \
\hline \text { Accounts receivable } & 950 &\
\hline
\end{array}$ What are the total non-current assets that would be shown on the balance sheet?

Accepted Answer

The answer of Below is a list of various balance...

Question 5

The following contains information from the records of the Wellborn Engineers and Architects. 
$\quad $$\quad $$\quad $$\quad $Wellborn Engineers and Architects
$\quad $$\quad $$\quad $$\quad $Selected financial information
$\quad $$\quad $$\quad $$\quad $31 December,2016
$$\begin{array} { | l | l | } 
\hline \text { Current assets } & \$ 70,000 \
\hline \text { Current liabilities } & 35,000 \
\hline \text { Non-current assets } & 99,000 \
\hline \text { Non-current liabilities } & 62,000 \
\hline \text { Total revenues } & 53,000 \
\hline \text { Total expenses } & 37,000 \
\hline
\end{array}$$ Which of the following statements is an accurate interpretation of the current ratio of Wellborn Engineers and Architects?

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. For Wellborn Engineers and Architects, the current ratio is $70,000 / $35,000 = 2.00. This means the company has $2.00 of current assets for every $1.00 of current liabilities.

Question 6

Which of the following statements is an accurate interpretation of the debt ratio?

Accepted Answer

A debt ratio of 0.60 or lower is generally considered a good, safe ratio as it indicates that a company has less debt in relation to its assets. A ratio above 1.00 indicates the company has more liabilities than assets, while a ratio of 2.0 would imply that the company has twice as much debt as assets, which could be a cause for concern. A debt ratio of 0.60 or lower is not a high-risk ratio, it is actually a lower-risk ratio.

Question 7

Which of the following is considered a good/safe rule-of-thumb debt ratio for businesses?

Accepted Answer

A debt ratio of 0.6 or below is considered a good/safe rule-of-thumb debt ratio for businesses. This means that a business has less debt than equity, indicating lower risk and higher ability to meet financial obligations. Higher debt ratios (such as 0.8 or above) indicate a higher level of financial risk and potential difficulty in meeting obligations. A debt ratio of 1.0 or above means that a business has more debt than equity, which may signal financial distress. A debt ratio of 1.5 or above is very high and would generally be considered unsustainable for most businesses.

Question 8

Below is a list of various balance sheet accounts and their balances. $\begin{array}{|l|l|}
\hline\text { Loan payable - short term } & \$ 1500 \
\hline \text { Salaries payable } & 5000 \
\hline \text { Loan payable-long term } & 25,000 \
\hline \text { Accounts payable } & 3500 \
\hline \text { Unearned revenue } & 1000 \
\hline \text { Interest payable } & 2300\\hline
\end{array}$ What are the total current liabilities shown on the balance sheet?

Accepted Answer

The answer of Below is a list of various balance...

Question 9

The following contains information from the records of the Wellborn Engineers and Architects. 
$\quad $$\quad $$\quad $Wellborn Engineers and Architects
$\quad $$\quad $$\quad $Selected financial information

$\quad $$\quad $$\quad $$\quad $$\quad $31 December 2016
$$\begin{array} { | l | l | } 
\hline \text { Current assets } & \$ 80,000 \
\hline \text { Current liabilities } & 42,000 \
\hline \text { Non-current assets } & 97,000 \
\hline \text { Non-current liabilities } & 64,000 \
\hline \text { Total revenues } & 53,000 \
\hline \text { Total expenses } & 34,000 \
\hline
\end{array}$$ Calculate the current ratio.

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. In this case, the current ratio is 80,000 / 42,000 = 1.9.

Question 10

Which of the following does the current ratio measure?

Accepted Answer

The current ratio is a liquidity ratio that measures the company's ability to meet current liabilities using current assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates that the company has enough current assets to pay off its current liabilities.

Question 11

Which of the following does the debt ratio measure?

Accepted Answer

The debt ratio measures the proportion of a company's assets that are financed with debt, which gives an indication of the company's overall ability to pay its liabilities. Option A is incorrect as it describes the equity ratio, Option B is incorrect as it describes the company's ability to invest in growth, and Option D is incorrect as it describes the current ratio.

Question 12

What is the key distinction between current and non-current liabilities?

Accepted Answer

The key distinction between current and non-current liabilities is that current liabilities are debts that are expected to be paid off within one year or one operating cycle, whichever is longer. Non-current liabilities are debts that are not due within one year or one operating cycle and are considered long-term liabilities. Therefore, option D is the correct answer. Option A is not correct because the balances of current and non-current liabilities can vary depending on the circumstances. Option B is also not correct because non-current liabilities can decrease or remain the same over time. Option C is not correct because non-current liabilities may not necessarily be permanent debts of the business as they can be refinanced or paid off earlier through various means.

Question 13

Which of the following statements is an accurate interpretation of the current ratio?

Accepted Answer

A current ratio of 2.0 indicates that a company has twice as many current assets as current liabilities, suggesting a strong ability to pay off its short-term obligations.

Question 14

Prepaid rent is usually a non-current asset.

Accepted Answer

Prepaid rent is typically considered a current asset because it represents a payment made for rent that will be used up within the next year.

Question 15

The current ratio is a measure of a company's:

Accepted Answer

The current ratio measures a company's ability to pay its short-term obligations (those due within one year) with its current assets (assets that can easily be converted to cash within one year). This is a measure of liquidity, which is a company's ability to meet its short-term obligations.

Question 16

Which of the following statements is an accurate interpretation of a debt ratio of 0.60?

Accepted Answer

A debt ratio of 0.60 means that for every $1.00 of assets, the company has $0.60 of liabilities. Therefore, the correct option is D. Option A and B are just flip sides of the same debt ratio while option C is the inverse of the debt ratio.

Question 17

Swan Song's adjusted trial balance as of 31 December 2017 is given below: \(\begin{array}{|l|l|l|}
\hline \text { Accounts } & {\text { Debit }}&\text { Credit } \
\hline \text { Cash } & \$ 13,000 \
\hline \text { Accounts receivable } & 11,000 \
\hline \text { Prepaid rent } & 9000 \
\hline \text { Prepaid insurance } & 2000 \
\hline \text { Office supplies } & 3000 \
\hline \text { Building } & 56,000 \\hline \text { Accumumlated depreciation - building } & & \$ 11,000 \
\hline \text { Equipment } & 38,000 & \
\hline \text { Accumumlated depreciation - equipment } & & 7000 \
\hline \text { Land } & 10,000 & \\hline \text { Accounts payable } && 5500 \
\hline \text { Salaries payable } && 4300 \
\hline \text { Interest payable } && 2700 \
\hline \text { Loan payable, non-current } && 5000 \
\hline \text { R. Lee, capital (deficit) } && 11,000 \\hline \text { R. Lee, drawings } & 6900 & \
\hline \text { Service revenue } & & 239,500 \
\hline \text { Salaries expense } & 43,500 & \\hline \text { Insurance expense } & 5000 \
\hline \text { Rent expense } & 12,000 \
\hline \text { Electricity and gas expense } & 18,000 \
\hline \text { Advertisting expense } & 9000 \
\hline \text { Depreciation expense - building } & 10,000 \
\hline \text { Depreciation expense - equipment } & 7900 \
\hline \text { Office supplies expense } & 1700 \\hline \text { Total }&\$ 286,000 &\$ 286,000 \
\hline
\end{array}\) Calculate the current ratio.

Accepted Answer

The answer of Swan Song's adjusted trial balance as of...

Question 18

Below is a list of various balance sheet accounts and their balances. $\begin{array}{|l|l|l|}
\hline \text { Accounts } & {\text { Debit }}&\text { Credit } \\hline \text { Building } & \$ 120,000 \
\hline \text { Cash } & 10,000 \
\hline \text { Supplies } & 300 \
\hline \text { Furniture } & 3000 \
\hline \text { Prepaid insurance } & 650 \
\hline \text { Accumulated depreciation - furniture } & & \$ 4000 \
\hline \text { Land } & 33,000 & \
\hline \text { Accumulated depreciation - building } & & 4300 \
\hline \text { Accounts receivable } & 2200 &\\hline
\end{array}$ What are the total current assets that would be shown on the balance sheet?

Accepted Answer

The answer of Below is a list of various balance...

Question 19

The following contains information from the records of the Wellborn Engineers and Architects.

$\quad $$\quad $$\quad $$\quad $Wellborn Engineers and Architects
$\quad $$\quad $$\quad $$\quad $Selected financial information
$\quad $$\quad $$\quad $$\quad $31 December 2017
$\begin{array}{|l|l|}
\hline\text { Current assets } & \$ 77000 \
\hline \text { Current liabilities } & 47000 \
\hline \text { Non-current assets } & 98000 \
\hline \text { Non-current liabilities } & 63000 \
\hline \text { Total revenues } & 53000 \
\hline \text { Total expenses } & 33000\\hline
\end{array}$ What is the debt ratio?

Accepted Answer

The debt ratio is calculated as total liabilities divided by total assets. Total liabilities = $47,000 (current) + $63,000 (non-current) = $110,000. Total assets = $77,000 (current) + $98,000 (non-current) = $175,000. Debt ratio = $110,000 / $175,000 = 0.63.

Question 20

A company has $140,000 in current assets;$600,000 in total assets;$80,000 in current liabilities,and$120,000 in total liabilities.The company has a current ratio of:

Accepted Answer

The answer of A company has $140,000 in current assets;$600,000...

Quiz 4: Completing the Accounting Cycle

Assets and liabilities are classified as either current or non-current to show their relative liquidity.

Adkins Company has a current ratio of 1.0 and a debt ratio of 0.7.Wilson Company has a current ratio of 1.4 and a debt ratio of 0.5.Both companies are in the same industry.Which of the following statements is TRUE?

Which of the following statements is an accurate interpretation of the debt ratio?

Which of the following is considered a good/safe rule-of-thumb debt ratio for businesses?

Which of the following does the current ratio measure?

Which of the following does the debt ratio measure?

What is the key distinction between current and non-current liabilities?

Which of the following statements is an accurate interpretation of the current ratio?

Prepaid rent is usually a non-current asset.

The current ratio is a measure of a company's:

Which of the following statements is an accurate interpretation of a debt ratio of 0.60?

A company has $140,000 in current assets;$600,000 in total assets;$80,000 in current liabilities,and$120,000 in total liabilities.The company has a current ratio of: