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Exam 2: A Further Look at Financial Statements

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Question 21

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The statement of financial position is normally presented as follows, when ordered in order of liquidity: Current assets, current liabilities, non-current assets, non-current liabilities, and shareholders' equity.

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Question 22

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Which of the following is not classified as a current asset?

A) Supplies
B) Short-term (trading) investments
C) A fund to be used to purchase a building within the next year
D) Equipment with an estimated useful life of five years

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Question 23

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Calculating financial ratios can give clues to underlying conditions that may not be noticed by examining each financial statement item separately.

The main difference between intangible assets and property, plant, and equipment is the length of the asset's life.

Comparability and understandability are examples of enhancing qualitative characteristics.

Consistency aids comparability when a company uses the same accounting principles and methods from year to year or when companies with similar circumstances use the same accounting principles.

Companies using Accounting Standards for Private Enterprises (ASPE) are not required to present earnings per share information in their financial statements.

Which of the following is not considered to be an asset?

A liability is normally classified as a current liability if it is to be paid within the coming year.

Financial reporting does not have to present the economic substance of a transaction in order to provide a faithful representation of what really happened

From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.

Which of the following statements is not true?

The price-earnings ratio is a measure of liquidity.

All companies, regardless of size, should have a current ratio of at least 2:1.

In order for information to be relevant, it must be reported on a timely basis.

Working capital is calculated as:

In general, standard setters require that most assets be recorded using historical cost because:

The statement of financial position is normally presented as follows, when ordered in order of reverse liquidity: Non-current assets, current assets, shareholders' equity, non-current liabilities, and current liabilities.

Canada has adopted international financial reporting standards for publicly traded companies.

If a company is not a going concern, the classification of its assets and liabilities does not matter.