Deck 3: Balance Sheet

Question 1

Treasury stock is best classified as:

A)a current asset.
B)a long-term investment.
C)a contra liability.
D)a reduction of stockholders' equity.
E)a reduction of retained earnings.

Answer 1

D

Question 2

Which of the following is not true relating to treasury stock?

A)A firm creates treasury stock when it repurchases its own stock and does not retire it.
B)Treasury stock lowers the stock outstanding.
C)Treasury stock may be recorded at the cost of the stock.
D)Treasury stock may be recorded at par or stated value.
E)Treasury stock is,in essence,an increase in paid-in capital.

Answer 2

E

Question 3

Which of the following is a current liability?

A)Prepaid insurance
B)Retained earnings
C)Unearned rent revenue
D)Bonds payable
E)Common stock

Answer 3

C

Question 4

Tangible assets on the balance sheet should include:

A)equipment.
B)inventory.
C)trademarks.
D)investments.
E)accrued insurance.

Question 5

Which of the following is not a common characteristic of preferred stock?

A)Voting rights
B)Preference as to dividends
C)Preference in liquidation
D)Callability by the corporation
E)None of the answers are correct.

Question 6

Company A owns shares of Company B and Company C.The statements of Company B are consolidated with those of Company A.The statements of Company C are not consolidated.Company A reports "Noncontrolling Interest" on its balance sheet.This account represents:

A)A's noncontrolling share of the stock of B.
B)A's noncontrolling share of the stock of C.
C)the noncontrolling share by outside owners of the stock of A.
D)the noncontrolling share by outside owners of the stock of B.
E)the noncontrolling share by outside owners of the stock of C.

Question 7

At the beginning of the year,Execon Company had total assets of $200,000,total liabilities of $110,000,and shareholders' equity of $90,000.For the year,Execon Company earned net income of $75,000 and declared cash dividends of $30,000.At the end of the year,the company had total assets of $300,000 and its shareholders' equity was at $135,000.At the end of the year,Execon Corporation had total liabilities of:

A)$0.
B)$45,000.
C)$50,000.
D)$165,000.
E)None of the answers are correct.

Question 8

The current asset section of the balance sheet should include:

A)land.
B)trademarks.
C)investment in C Company (for purposes of control).
D)dividends payable.
E)work in process inventory.

Question 9

Which of the following is not a problem inherent in balance sheet presentation?

A)Most assets are valued at cost.
B)Varying methods are used for asset valuation.
C)Not all items of value to the firm are included as assets.
D)Liabilities related to contingencies may not appear on the balance sheet.
E)The owners' interest will be indicated.

Question 10

Which of the following is not a proper use of notes?

A)To describe the nature and effect of a change in accounting principle,such as from FIFO to LIFO.
B)To indicate the basis for asset valuation.
C)To indicate the method of depreciation.
D)To correct an improper financial statement presentation.
E)To describe a firm's debt.

Question 11

Which of the following accounts would not be classified as an intangible?

A)Franchises
B)Research and development
C)Patent
D)Trademarks
E)Goodwill

Question 12

Drama Products Inc.has issued redeemable preferred stock.For analysis purposes,these securities are best classified as:

A)marketable securities.
B)long-term investments.
C)long-term debt.
D)paid-in capital.
E)retained earnings.

Question 13

Ownership of debt instruments of the government and other companies that can be readily converted to cash are best reported as:

A)long-term investments.
B)cash.
C)marketable securities.
D)intangibles.
E)inventory of near-cash items.

Question 14

The balance sheet reports:

A)the assets,liabilities,gains,and losses for a period of time.
B)the changes in assets,liabilities,and equity for a period of time.
C)the assets,expenses,and liabilities as of a certain date.
D)the probable future benefits,probable future sacrifices,and residual interest for a period of time.
E)the financial condition of an accounting entity as of a particular date.

Question 15

The most popular depreciation method for financial reporting is the following:

A)units-of-production.
B)sum-of-the-years'-digits.
C)declining-balance.
D)straight-line.
E)other.

Question 16

If a parent has some control over a subsidiary but the subsidiary is not consolidated,the subsidiary is accounted for as:

A)a marketable security.
B)an investment.
C)a liability.
D)a fixed asset.
E)None of the answers are correct.

Question 17

The current liability section of the balance sheet should include:

A)buildings.
B)goodwill.
C)land held for speculation purposes.
D)accounts payable.
E)None of the answers are correct.

Question 18

Which of the following would not appear on a conventional balance sheet?

A)Income taxes payable
B)Funds from operations
C)Cash surrender value of life insurance
D)Appropriation for contingencies (restriction of retained earnings)
E)Patents

Question 19

Which of the following is not true about an ESOP?

A)An ESOP will reduce the amount of voting stock in the hands of employees.
B)An ESOP must be a permanent trusted plan for the exclusive benefit of the employees.
C)The plan participants become eligible for favorable taxation of distributions from the plan.
D)Commercial lending institutions,insurance companies,and mutual funds are permitted an exclusion from income for 50% of the interest received on loans used to finance an ESOP's acquisition of company stock.
E)An ESOP may reduce the potential of an unfriendly takeover.

Question 20

Which of the following is not a current asset?

A)Marketable securities
B)Material inventory
C)Unearned rent income
D)Prepaid interest
E)Accrued insurance

Question 21

The stockholders' equity section of the balance sheet includes redeemable preferred stock.

Question 22

The principal financial statements are the balance sheet,income statement,and statement of cash flows.

Question 23

Which of the following would not be considered a subsequent event to financial statements?

A)A major customer declares bankruptcy subsequent to the balance sheet date,but prior to issuing the statements.This event was not considered on the balance sheet date.
B)A major purchase of a subsidiary to the balance sheet date,but prior to issuing the statements.
C)Substantial debt incurred subsequent to the balance sheet date,but prior to issuing the statements.
D)Substantial stock issued subsequent to the balance sheet date,but prior to issuing the statements.
E)Hiring of employees for a new store,subsequent to the balance sheet date,but prior to issuing the statements.

Question 24

Corporations do not use a standard title for owners' equity.

Question 25

Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

Question 26

Deferred taxes are caused by using different accounting methods for tax and financial reporting purposes.

Question 27

Generally accepted accounting principles and the Internal Revenue Code of tax law require that the same depreciation method be used for both the financial statements and the federal tax return.

Question 28

All intangibles are amortized over their useful lives or their legal lives,whichever is shorter.

Question 29

The financial statements of legally separate entities may be issued to show the financial position and income as they would appear if the companies were one legal entity.Such statements reflect a legal,rather than an economic,concept of the entity.

Question 30

The purpose of a balance sheet is to show the financial condition of an accounting entity for a period of time.

Question 31

Noncontrolling interest reflects the ownership of noncontrolling shareholders in the equity of consolidated subsidiaries that are less than wholly owned.

Question 32

A sole proprietorship form of business has only one owner.

Question 33

When preferred stock has a preference as to dividends,the current year's preferred dividend must be paid before a dividend can be paid to common stockholders.

Question 34

When a firm repurchases its own stock and retires it,the stock is called treasury stock.

Question 35

Long-term investments,usually stocks and bonds of other companies,are often held to maintain a business relationship or exercise control.

Question 36

Current assets are listed on the balance sheet in order of liquidity.

Question 37

If dividends are not declared by the board of directors in a particular year,a holder of cumulative preferred stock will never be paid that dividend.

Question 38

A quasi-reorganization is an accounting procedure equivalent to an accounting fresh start.

Question 39

Preferred stock usually has voting rights.

Question 40

Warranty obligations are estimated in order to recognize the obligation at the balance sheet date and to charge the expense to the period of the sale.

Question 41

The deferred compensation element of an equity-based deferred compensation arrangement is the amount of compensation cost deferred and amortized (expensed)to future periods as the services are provided.

Question 42

The following balance sheet,prepared by Whoops Bookkeeping Service,has been given to you to review.Required:
Prepare a corrected,properly classified balance sheet in report form.

Question 43

There are many alternative titles for the statement of stockholders' equity.The most frequently used alternative title is the statement of shareholders' equity.

Question 44

Subsequent events are those that occur after the balance sheet date,but before the statements are issued.

Question 45

The Internal Revenue Code penalizes borrowing for an ESOP.

Question 46

Using IFRS,usually noncurrent assets are presented first,followed by current assets.

Question 47

When the bond market interest rate is 6% and the bond contractual interest rate is 8%,the bond will sell at a premium.

Question 48

Noncontrolling interest reflects the ownership of noncontrolling stockholders in the equity of consolidated subsidiaries less than wholly occurred.

Question 49

IFRS require a standard format for the balance sheet.

Question 50

Noncontrolling interest should be presented at the bottom of stockholders equity.

Question 51

The balance sheet is presented with the assets equal to liabilities plus equity.When this presentation is presented side by side,it is called the account form.

Question 52

An item of equipment acquired on January 1,at a cost of $100,000,has an estimated use of 50,000 hours.During the first three years,the equipment was used 11,000,8,000,and 7,000 hours,respectively.The equipment has an estimated life of five years and an estimated salvage of $10,000.Required:
Determine the depreciation for each of the three years,using the straight-line method,the double declining-balance method,the sum-of-the-years'-digits method,and the units-of-production method.

Question 53

A partial list of accounts for Johnson and Clark,in alphabetical order,is presented below:

Required:
Prepare a consolidated balance sheet in good format,without monetary amounts,for December 31,2012.Use the format Current Assets;Property,Plant,and Equipment;Investments;Intangibles;Current Liabilities;Long-Term Liabilities;and Stockholders' Equity.Do not use the accounts not found on the balance sheet.

Question 54

The following is a partial listing of accounts for Euisara,Inc. ,for the year ended December 31,2012.Required:
Prepare a balance sheet in good format for December 31,2012.

Question 55

The following balance sheet,prepared by a careless bookkeeper,has been given to you to review.Required:
List any corrections that need to be made.Errors can be in classification,lack of disclosure,format,or terminology.

Question 56

The analyst must assume that securities classified as marketable securities are readily marketable.

Question 57

Under IFRS,reserves may result from upward revaluations of properties and investments.

Question 58

An ESOP is a qualified stock-bonus or combination stock-bonus and money-purchase pension plan designed to invest primarily in stock,other than the employer's securities.

Question 59

Required:
Using the information given below,prepare a classified balance sheet in good form for Babic Company at December 31,2012.

Question 60

There are two types of subsequent events under GAAP;those that require retroactive recognition,and those that do not require retroactive recognition but require disclosure in the notes to the financial statements.

Question 61

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Accumulated Depreciation

Question 62

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Accounts Payable

Question 63

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Accounts Payable

Question 64

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Accounts Receivable

Question 65

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Common Stock

Question 66

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Bonds Payable

Question 67

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Unamortized Premium on Bonds Payable

Question 68

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Cash

Question 69

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Equipment

Question 70

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Convertible Debentures

Question 71

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Premium on Preferred Stock

Question 72

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Copyright

Question 73

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Goodwill

Question 74

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Accrued Liabilities

Question 75

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Marketable Securities

Question 76

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Inventories

Question 77

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Investment in another Company Bonds (long-term investment)

Question 78

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Land

Question 79

Match each account to the proper account description;not all letters will be used.
a.Stocks and bonds of other companies held for the purpose of exercising control.
b.An accumulation of the sum of the expense since the beginning of the benefit period.
c.Outside ownership in the equity of consolidated subsidiaries.
d.Machinery and tools,valued at historical cost.
e.Monies due because expenses,such as salaries,are incurred in a different period than when the cash outlay occurs.
f.The most liquid of assets,it may also include savings accounts.
g.Goods on hand.
h.A potential liability created by differing tax and reporting methods.
i.Ownership and debt instruments readily converted to cash.
j.An expenditure made in advance of the use of the service or good.
k.Monies due from customers arising from sale or service rendered.
l.The capital stock of residual owners.
m.Bonds that can be exchanged for stock at the option of the holder.
n.Undistributed earnings of the corporation.
o.Shares of the firm's own stock that have been repurchased.
p.Monies due for goods bought for use or resale.
q.Excess over legal par paid at time of sale.
r.Nondepreciable real estate.
s.Collections in advance of service.
t.Securities that give the holder the right to buy additional shares of common stock at a fixed price.
Cash

Question 80

Match
a.Current Assets
f.Current Liability
b.Tangible Assets
g.Long-Term Liability
c.Investments
h.Capital Stock
d.Intangibles
i.Retained Earnings
e.Other
j.Item Not Included on Balance Sheet
Depreciation Expense