Question 1

___________are also referred to as short-term investments.

Accepted Answer

Marketable securities

Question 2

Many companies list an account titled___________on the balance sheet even though no dollar amount will appear.

Accepted Answer

commitments and contingencies

Question 3

A___________lease affects both the balance sheet and the income statement.

Accepted Answer

capital

Question 4

Retained earnings is the unused stash of cash that a firm has accumulated since inception.

Accepted Answer

Retained earnings represent the cumulative amount of net income earned by a company that is retained by the company rather than distributed to its shareholders as dividends. It is not necessarily a stash of cash but an accounting figure that reflects the reinvestment of earnings into the business.

Question 5

The valuation of marketable securities on the balance sheet requires the separation of investment securities into three categories: held to maturity, trading securities, and securities available for sale.

Accepted Answer

This is true as per generally accepted accounting principles (GAAP). The valuation and presentation of marketable securities on the balance sheet is determined by the intention of the company with respect to holding or selling those securities. Held to maturity securities are those that the company has the intent and ability to hold until maturity, trading securities are those that are actively traded and held for short-term profits, and securities available for sale are those that are not classified as either held to maturity or trading securities.

Question 6

Working capital refers to the investment in property, plant and equipment.

Accepted Answer

Working capital refers to the funds needed for day-to-day operations, such as inventory, accounts receivable, and accounts payable. It does not include investments in property, plant, and equipment.

Question 7

A classified balance sheet means that the asset and liability sections are categorized into key areas.

Accepted Answer

A classified balance sheet groups similar assets and liabilities together, such as current vs. long-term items.

Question 8

The net realizable value of accounts receivable is the actual amount of the account less an___________

Accepted Answer

The answer of The net realizable value of accounts receivable...

Question 9

The three cost flow assumptions most frequently used in the U.S.are ___________, ___________, and ___________.

Accepted Answer

The answer of The three cost flow assumptions most frequently...

Question 10

Companies that are paid in advance for services or products record a liability on the receipt of cash in an account titled___________ or___________.

Accepted Answer

The answer of Companies that are paid in advance for...

Question 11

Companies that use IFRS may switch the order of presentation of assets and liabilities, listing noncurrent items before current items.

Accepted Answer

According to IFRS, companies are allowed to list noncurrent assets and liabilities before current assets and liabilities in their financial statements. This may result in a different order of presentation compared to GAAP reporting.

Question 12

___________are those assets expected to be converted into cash within one year or operating cycle, whichever is longer.

Accepted Answer

The answer of ___________are those assets expected to be converted...

Question 13

Accounts receivable are recorded on the balance sheet at gross realizable value.

Accepted Answer

Accounts receivable are recorded on the balance sheet at net realizable value, which is the gross amount of receivables minus any allowance for doubtful accounts.

Question 14

A------expresses each item on the balance sheet as a percentage of total assets.

Accepted Answer

The answer of A------expresses each item on the balance sheet...

Question 15

___________arises when one company acquires another company for a price in excess of the fair market value of the net identifiable assets.

Accepted Answer

The answer of ___________arises when one company acquires another company...

Question 16

The balance sheet is also called the statement of condition or statement of financial position.

Accepted Answer

The balance sheet is also known as the statement of condition or statement of financial position.

Question 17

The balance sheet is prepared for a period of time, generally a year.

Accepted Answer

The balance sheet presents the financial position of a company on a specific date, not for a period of time. The income statement and statement of cash flows are prepared for a period of time, usually a year.

Question 18

A common-size balance sheet is useful to the analyst because it facilitates the structural analysis of the firm.

Accepted Answer

A common-size balance sheet expresses every item as a percentage of total assets, making it easier to compare and analyze the structure of different firms. This facilitates a more meaningful comparison and helps the analyst identify areas of strength or weakness in the company's financial position.

Question 19

Additional information helpful to the analysis of accounts receivable and the allowance account is provided in the schedule of------.

Accepted Answer

The answer of Additional information helpful to the analysis of...

Question 20

As part of an integrated disclosure system required by the SEC, the information presented in annual reports includes three-year audited balance sheets.

Accepted Answer

The SEC requires annual reports to include audited financial statements for the most recent fiscal year, not three-year audited balance sheets. These financial statements typically include a balance sheet, income statement, statement of cash flows, and statement of shareholders' equity, along with notes to the financial statements.

Quiz 2: The Balance Sheet