Question 1

The definition of fair value in SFAS No 157FASB ASC 820)is
A)Entry price based
B)Exit price based
C)Replacement cost based
D)Historical cost based

Accepted Answer

Fair value is defined as an exit price based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Therefore, fair value is not based on its acquisition cost or its replacement cost, but rather on the price that someone is willing to pay to acquire the asset or take on the liability.

Question 2

There would probably be a major difference between a statement of source and application of working capital and a cash flow statement in the treatment of
A)Dividends declared and paid
B)Sales of noninventory assets for cash at a loss
C)Payment of long-term debt
D)A change during the period in the accounts payable balance

Accepted Answer

The major difference between a statement of source and application of working capital and a cash flow statement in the treatment mentioned would be in "A change during the period in the accounts payable balance." This is because the statement of source and application of working capital focuses on changes in working capital, where accounts payable is a component, while a cash flow statement categorizes changes in cash flows from operating, investing, and financing activities without directly focusing on working capital changes.

Question 3

On a balance sheet,what is the preferable presentation of notes or accounts receivable from officers,employees,or affiliated companies?
A)As trade notes and accounts receivable if they otherwise qualify as current assets
B)As assets but separately from other receivables
C)As offsets to capital
D)By means of notes or footnotes

Accepted Answer

It is preferable to present notes or accounts receivable from officers, employees, or affiliated companies as assets but separately from other receivables. This allows for better transparency and understanding of the nature of the receivables.

Question 4

The valuation basis used in conventional financial statements is
A)Replacement cost
B)Market value
C)Original cost
D)A mixture of costs and values

Accepted Answer

The answer of The valuation basis used in conventional financial...

Question 5

Which of the following is not a balance sheet element?
A)Assets
B)Liabilities
C)Gains
D)Equities

Accepted Answer

Gains are not a balance sheet element. The three main balance sheet elements are assets, liabilities, and equities.

Question 6

When preparing a statement of changes in financial position using the cash basis for defining funds,an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because
A)Funds were increased since inventory is a current asset
B)The net increase in inventory reduced cost of goods sold but represents an assumed use of cash
C)Inventory is an expense deducted in computing net earnings,but is not a use of funds
D)All changes in noncash accounts must be disclosed under the all financial resources concept

Accepted Answer

An increase in ending inventory over beginning inventory reduces the amount of cost of goods sold and is a non-cash adjustment that needs to be added back to net earnings when preparing a statement of changes in financial position using the cash basis for defining funds. Although inventory is a current asset, it does not represent a use of funds until it is actually sold. Therefore, choice A is incorrect. Choice C is also incorrect because inventory is not an expense; it is an asset. Finally, choice D is incorrect because the all financial resources concept requires disclosure of all changes in both cash and non-cash accounts, which is not relevant to this question.

Question 7

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts
A)Inventory back to cash or 12 months,whichever is shorter
B)Receivable s 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 to cash or 12 month,whichever is longer

Accepted Answer

Current assets are those which can be converted into cash within 12 months from the end of the reporting period. Inventory is a current asset if it can be sold and converted into cash within 12 months, otherwise it is classified as a noncurrent asset. Therefore, the basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts inventory back to cash or 12 months, whichever is longer.

Question 8

Which of the following is not an important aspects of SFAS No.157FASB ASC 820)?
A)A new definition of fair value.
B)A requirement that all assets and liabilities are to be measured at their fair value.
C)A fair value hierarchy used to classify the source of information used in fair value measurements for example,market based or nonmarket based).
D)New disclosures of assets and liabilities measured at fair value based on their level in the hierarchy.

Accepted Answer

The requirement that all assets and liabilities are to be measured at their fair value is actually an important aspect of SFAS No.157/FASB ASC 820. A new definition of fair value, a fair value hierarchy, and new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy are all important aspects of SFAS No.157/FASB ASC 820.

Question 9

The working capital format is one possible format for presenting a statement of changes in financial position.Which of the following formats is are)also theoretically acceptable? Cash Quick Assets
A)Acceptable Not acceptable
B)Not acceptable Not acceptable
C)Not acceptable Acceptable
D)Acceptable Acceptable

Accepted Answer

Both the Cash and Quick Assets formats are theoretically acceptable as alternatives to the Working Capital format for presenting a statement of changes in financial position. Therefore, Choice D is the best answer as it correctly identifies that both formats are acceptable.

Question 10

A basic objective of the statement of cash flows is to
A)Supplant the income statement and balance sheet
B)Disclose changes during the period in all asset and all liability accounts
C)Disclose the change in working capital during the period
D)Provide essential information for financial statements users in making economic decisions

Accepted Answer

The main objective of the statement of cash flows is to provide essential information for financial statements users in making economic decisions. It shows the inflows and outflows of cash and cash equivalents and helps users understand the company's cash position and ability to generate cash in the future. The statement of cash flows does not replace the income statement and balance sheet but rather complements them by providing additional information on the company's cash flows. The statement of cash flows also does not disclose changes in all asset and liability accounts, but rather only the changes in cash and cash equivalents. Lastly, the statement of cash flows can indirectly disclose changes in working capital, but its main focus is on cash flows.

Question 11

Which of the following is nota component of equity?
A)Common stock
B)Treasury stock
C)Retained earnings
D)Unearned revenue

Accepted Answer

Unearned revenue is not a component of equity. It is a liability account that represents prepayment for goods or services that have not yet been delivered or earned. Common stock, treasury stock, and retained earnings are all components of equity.

Question 12

The balance sheet discloses
A)Stocks
B)Flows
C)Both stocks andf lows
D)Neither stocks nor flows

Accepted Answer

The answer of The balance sheet discloses
A)Stocks
B)Flows
C)Both stocks andf lows
D)Neither...

Question 13

Which of the following should theoretically be presented in a statement of changes in financial position only because of the all-financial-resources concept?
A)Conversion of preferred stock to common stock
B)Purchase of treasury stock
C)Sale of common stock
D)Declaration of cash dividend

Accepted Answer

The answer of Which of the following should theoretically be...

Question 14

The SFAS No 157 FASB ASC 820)fair value hierarchy contains
A)Two level
B)Three levels
C)Four levels
D)Five levels

Accepted Answer

The fair value hierarchy contains three levels, where Level 1 inputs are quoted prices in active markets, Level 2 inputs are observable market data, and Level 3 inputs are unobservable data that requires significant judgment or estimation.

Question 15

The calculation net income/sales is the formula for which of the following ratios
A)Return on assets
B)Profit margin
C)Asset turnover
D)Asset usage

Accepted Answer

The calculation of net income/sales is the formula for profit margin, also known as net profit margin. This ratio measures the proportion of sales that are turned into profits after all expenses have been deducted.

Question 16

A statement of cash flows should be issued by a profit-oriented business
A)As an alternative to the statement of income and retained earnings
B)Only if the business classifies its assets and liabilities as current and noncurrent
C)Only when two-year comparative balance sheets are not issued
D)Whenever a balance sheet and a statement of income and retained earnings are issued

Accepted Answer

A statement of cash flows should be issued whenever a balance sheet and a statement of income and retained earnings are issued as it provides information on the cash inflows and outflows of the business. It is an important financial statement that helps in assessing the liquidity and solvency of the business. Choice A is incorrect as a statement of income and retained earnings provide different information than a statement of cash flows. Choice B is incorrect as the classification of assets and liabilities as current and noncurrent is important for preparing the balance sheet, but it does not determine whether a statement of cash flows should be issued. Choice C is incorrect as a two-year comparative balance sheet is not a determining factor in the issuance of the statement of cash flows.

Question 17

Which of the following s the lowest level of the SFAS 157 FASB ASC 820)fair value hierarchy?
A)Unobservable inputs that are corroborated by observable market data)
B)Unobservable inputs that are not corroborated by observable market data)
C)Observable market-based inputs or unobservable inputs that are corroborated by market data)
D)Quoted market prices for identical assets or liabilities in active markets

Accepted Answer

The lowest level of the fair value hierarchy is Level 3, which includes unobservable inputs that are not corroborated by observable market data.

Question 18

A gain on the sale of plant assets in the ordinary course of business should be presented in a statement of cash flows as a an)
A)Source and use of cash
B)Use of cash
C)Addition to income from continuing operations
D)Deduction from income from continuing operations

Accepted Answer

The answer of A gain on the sale of plant...

Question 19

Which of the following should be presented nn a statement of cash flows? Conversion of Conversion of
Long-term debt preferred stock
To common stock to common stock
A)No No
B)No Yes
C)Yes Yes
D)Yes No

Accepted Answer

Conversion of long-term debt to common stock and conversion of preferred stock to common stock are both non-cash transactions and should be presented in a statement of cash flows.

Question 20

A transaction that would appear as an application of funds on a conventional funds statement using the all-financial-resources concept,but not on a statement using the traditional working capital concept would be the
A)Acquisition of property,plant,and equipment for cash
B)Reacquisition of bonds issued by the reporting entity
C)Acquisition of property,plant,and equipment with an issue of common stock
D)Declaration and payment of dividends

Accepted Answer

Under the traditional working capital concept, only current assets and current liabilities are considered in the funds statement. Therefore, the acquisition of property, plant, and equipment through the issue of common stock would not be reflected as an application of funds in the statement. However, under the all-financial-resources concept, all assets and liabilities, both current and non-current, are considered in the funds statement, and the acquisition of property, plant, and equipment with the issue of common stock would be reflected as an application of funds.

Quiz 7: Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

The definition of fair value in SFAS No 157FASB ASC 820) is

There would probably be a major difference between a statement of source and application of working capital and a cash flow statement in the treatment of

On a balance sheet,what is the preferable presentation of notes or accounts receivable from officers,employees,or affiliated companies?

The valuation basis used in conventional financial statements is

Which of the following is not a balance sheet element?

When preparing a statement of changes in financial position using the cash basis for defining funds,an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the accounting entity expends cash to the time it converts

Which of the following is not an important aspects of SFAS No.157FASB ASC 820) ?

The working capital format is one possible format for presenting a statement of changes in financial position.Which of the following formats is are) also theoretically acceptable? Cash Quick Assets

A basic objective of the statement of cash flows is to

Which of the following is nota component of equity?

The balance sheet discloses

Which of the following should theoretically be presented in a statement of changes in financial position only because of the all-financial-resources concept?

The SFAS No 157 FASB ASC 820) fair value hierarchy contains

The calculation net income/sales is the formula for which of the following ratios

A statement of cash flows should be issued by a profit-oriented business

Which of the following s the lowest level of the SFAS 157 FASB ASC 820) fair value hierarchy?

A gain on the sale of plant assets in the ordinary course of business should be presented in a statement of cash flows as a an)

Which of the following should be presented nn a statement of cash flows? Conversion of Conversion of Long-term debt preferred stock To common stock to common stock

A transaction that would appear as an application of funds on a conventional funds statement using the all-financial-resources concept,but not on a statement using the traditional working capital concept would be the