Question 1

Current assets are cash or other assets that are reasonably expected to be converted into cash, sold, or consumed within one year or a normal operating cycle.An operating cycle is defined as the company's ability to

Accepted Answer

A)  spend cash to payoff the company's liabilities
B)  spend cash to acquire inventory, which is sold and returned to cash
C)  spend cash to acquire inventory, which is sold to customers in the normal course of business
D)  spend cash in the generation of services, which can result in an increase in revenue and net income from operations

Question 2

A deficit occurs when a company's

Accepted Answer

A)  retained earnings are less than it's common stock
B)  dividends distributed are greater than comprehensive income
C)  dividends and cumulative losses are greater than cumulative net income
D)  retained earnings are less than assets minus liabilities

Question 3

Match between columns
                        Premises: Receivables net of allowance for doubtful accounts
Prepaid expenses
Investment securities available for sale
Patents
Raw materials inventory adjusted downward to lower of cost or market
Capital lease obligations
Financial instruments
Property, plant, and equipment
Bonds payable
Trading securities

Accepted Answer

The Answer of historical cost and current cost and exit is...

Question 4

If the balance sheet lists liabilities and stockholders' equity sequentially under the assets, the format being used is the

Accepted Answer

A)  account form
B)  report form
C)  working capital form
D)  financial position form

Question 5

Justification for having both intangible assets and other assets listed on a balance sheet include

Accepted Answer

A)  that intangible assets have no physical existence and other assets are deferred charges
B)  that having more items listed on the balance sheet improves the users' understanding of the company
C)  that the intangible assets are more important than the tangible assets
D)  that the other asset classification is important because goodwill cannot be amortized, so it needs to be recorded on the balance sheet

Question 6

The residual interest in a company's assets is represented by its

Accepted Answer

A)  net assets
B)  stockholders' equity
C)  ownership interest
D)  all of these

Question 7

According to APB Opinion No.22, the initial note to the financial statements should describe

Accepted Answer

A)  the calculation of comprehensive income
B)  the significant concentrations of credit risk
C)  the significant accounting policies
D)  the objectives of holding derivatives and the strategies for achieving them

Question 8

A friend of the family has just received her first set of financial statements from her accountant.When she finds out that you are an accounting major, she asks you the following question: "Why aren't my employees listed as an asset on my company's balance sheet?"
Required:
Write an explanation describing the characteristics that an economic resource must possess in order to be considered an asset.Include in your discussion the primary reason why "human resources" are not recognized as assets.

Accepted Answer

To be considered an asset, an economic r...

Question 9

A client of your accounting firm is impressed with the precision and detail in the financial statements that you have just prepared for his company.However, he wants to know if there are any limitations to the information contained in them.
Required:
Describe four limitations of the balance sheet.

Accepted Answer

Limitations of the balance sheet include...

Question 10

A reader might find information about gain contingencies in an annual report by examining

Accepted Answer

A)  a contingent account receivable
B)  an accrued revenue
C)  a deferred revenue
D)  footnote disclosures

Question 11

All of the following items would appear on the balance sheet except

Accepted Answer

A)  an investment in another company's bonds
B)  an investment in marketable securities
C)  a realized gain on the sale of a patent
D)  the premium related to a bond liability that is still two years from maturity

Question 12

In preparing a statement of changes in stockholders' equity, the company includes land given to a stockholder as a dividend.This transaction is included in the statement because it represents

Accepted Answer

A)  an investment by an owner that increases equity.
B)  an investment by an owner that decreases equity.
C)  a distribution to an owner that increases equity.
D)  a distribution to an owner that decreases equity.

Question 13

The amount of cash (or equivalent) that currently would be required to replace the service capacity of the asset is called the asset's

Accepted Answer

A)  historical cost
B)  current cost
C)  current exit value
D)  present value

Question 14

Which of the following would typically be recorded as an intangible asset?

Accepted Answer

A)  computer software costs
B)  bond issue costs
C)  idle fixed assets
D)  prepaid pension costs

Question 15

The rationale for disclosing material subsequent events include all of the following except

Accepted Answer

A)  these events may affect the users predictions about future cash flows
B)  without the disclosures the financial information may be misleading
C)  such disclosures will help convict management of hiding significant economic transactions
D)  reporting such events is consistent with the concept of full disclosure

Question 16

GAAP requires that all derivative financial instruments be reported at their

Accepted Answer

A)  historical cost
B)  fair value
C)  present value
D)  par value

Question 17

State law may require that capital stock have which of the following values?

Accepted Answer

A)  stated value
B)  market value
C)  no-par value
D)  present value

Question 18

The SEC established integrated disclosures to

Accepted Answer

A)  establish full disclosure
B)  demonstrate its legal authority to establish GAAP
C)  satisfy the form 10-K disclosure requirements
D)  control Management's Discussion and Analysis

Question 19

According to a recent issue of Accounting Trends and Techniques, the most frequently used balance sheet format is the

Accepted Answer

A)  financial position form
B)  report form
C)  account form
D)  combined form

Question 20

Which is not a characteristic of an asset?

Accepted Answer

A)  The resource must be useful only in the entity's activities and have been acquired by purchase, production, or stockholder investment.
B)  The entity must be able to obtain the future benefit and control others' access to it.
C)  The transaction or event giving rise to the entity's right to or control over the benefit must have already occurred.
D)  The resource must singly, or in combination with other resources, have the capacity to contribute directly, or indirectly, to the entity's future net cash inflows.

Exam 4: The Balance Sheet and the Statement of Changes in Stockholders Equity

Which is not a characteristic of an asset?

Correct Answer
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A client of your accounting firm is impressed with the precision and detail in the financial statements that you have just prepared for his company.However, he wants to know if there are any limitations to the information contained in them. Required: Describe four limitations of the balance sheet.

Correct Answer
verified
Limitations of the balance sheet include...
View Answer

Which of the following would typically be recorded as an intangible asset?

Correct Answer
verified

All of the following items would appear on the balance sheet except

Correct Answer
verified

State law may require that capital stock have which of the following values?

Correct Answer
verified

A deficit occurs when a company's

Correct Answer
verified

GAAP requires that all derivative financial instruments be reported at their

Correct Answer
verified

Current assets are cash or other assets that are reasonably expected to be converted into cash, sold, or consumed within one year or a normal operating cycle.An operating cycle is defined as the company's ability to

Correct Answer
verified

The amount of cash (or equivalent) that currently would be required to replace the service capacity of the asset is called the asset's

Correct Answer
verified

Justification for having both intangible assets and other assets listed on a balance sheet include

Correct Answer
verified

The rationale for disclosing material subsequent events include all of the following except

Correct Answer
verified

A reader might find information about gain contingencies in an annual report by examining

Correct Answer
verified

Match each measurement alternative to its balance sheet element by placing the appropriate letter in the space provided

Correct Answer
verified
To be considered an asset, an economic r...
View Answer

According to a recent issue of Accounting Trends and Techniques, the most frequently used balance sheet format is the

Correct Answer
verified

The SEC established integrated disclosures to

Correct Answer
verified

If the balance sheet lists liabilities and stockholders' equity sequentially under the assets, the format being used is the

Correct Answer
verified

In preparing a statement of changes in stockholders' equity, the company includes land given to a stockholder as a dividend.This transaction is included in the statement because it represents

Correct Answer
verified

According to APB Opinion No.22, the initial note to the financial statements should describe

Correct Answer
verified

The residual interest in a company's assets is represented by its

Correct Answer
verified

Exam 4: The Balance Sheet and the Statement of Changes in Stockholders Equity

Which is not a characteristic of an asset?

Correct AnswerverifiedShow Answer

A client of your accounting firm is impressed with the precision and detail in the financial statements that you have just prepared for his company.However, he wants to know if there are any limitations to the information contained in them. Required: Describe four limitations of the balance sheet.

Correct AnswerverifiedLimitations of the balance sheet include...View AnswerShow Answer

Which of the following would typically be recorded as an intangible asset?

Correct AnswerverifiedShow Answer

All of the following items would appear on the balance sheet except

Correct AnswerverifiedShow Answer

State law may require that capital stock have which of the following values?

Correct AnswerverifiedShow Answer

A deficit occurs when a company's

Correct AnswerverifiedShow Answer

GAAP requires that all derivative financial instruments be reported at their

Correct AnswerverifiedShow Answer

Current assets are cash or other assets that are reasonably expected to be converted into cash, sold, or consumed within one year or a normal operating cycle.An operating cycle is defined as the company's ability to

Correct AnswerverifiedShow Answer

The amount of cash (or equivalent) that currently would be required to replace the service capacity of the asset is called the asset's

Correct AnswerverifiedShow Answer

Justification for having both intangible assets and other assets listed on a balance sheet include

Correct AnswerverifiedShow Answer

The rationale for disclosing material subsequent events include all of the following except

Correct AnswerverifiedShow Answer

A reader might find information about gain contingencies in an annual report by examining

Correct AnswerverifiedShow Answer

Match each measurement alternative to its balance sheet element by placing the appropriate letter in the space provided

Correct AnswerverifiedTo be considered an asset, an economic r...View AnswerShow Answer

According to a recent issue of Accounting Trends and Techniques, the most frequently used balance sheet format is the

Correct AnswerverifiedShow Answer

The SEC established integrated disclosures to

Correct AnswerverifiedShow Answer

If the balance sheet lists liabilities and stockholders' equity sequentially under the assets, the format being used is the

Correct AnswerverifiedShow Answer

In preparing a statement of changes in stockholders' equity, the company includes land given to a stockholder as a dividend.This transaction is included in the statement because it represents

Correct AnswerverifiedShow Answer

According to APB Opinion No.22, the initial note to the financial statements should describe

Correct AnswerverifiedShow Answer

The residual interest in a company's assets is represented by its

Correct AnswerverifiedShow Answer

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Limitations of the balance sheet include...
View Answer

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To be considered an asset, an economic r...
View Answer

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