Acct chap 5
|Which of the following is a limitation of the balance sheet?|| Many items that are of financial value are omitted. |
Current fair values are not reported for many assets and liabilities.
Judgments and estimates are used.
All of these are limitations of the Balance Sheet
|The balance sheet is useful for analyzing all of the following except||Solvency- refers to the ability of a company to pay its debts as they mature.|
Financial flexibility- measures the ability of an enterprise to take affective actions to alter the amounts and timing of cashflows so it can respond to unexpected needs and opportunities.
Liquidity- describes the amount of time that is expected to elapse until an asset is realized or otherwise converted into cahs or until a liability has to be paid.
|Which of the following statements about the balance sheet is incorrect?||***It reports the assets, liabilities, and equity of a company for a period of time.***( it reports at a specific date or moment on time)|
It helps in predicting the amounts, timing, and uncertainty of future cash flows.
It provides information about the nature and amounts of investments in resources, obligations to creditors, and the owners' equity.
It is sometimes referred to as the statement of financial position.
|Major limitations of the balance sheet include all of the following except:|| judgments and estimates are used in determining many of the items reported.|
it necessarily omits many items that are of financial value but cannot be recorded objectively.
most assets and liabilities are stated at historical cost.
**only amounts known with certainty are reported.**
|All of the following would be classified as current liabilities at December 31, 2012 except:|| advances received from customers.|
current portion of long-term debt.
accrued warranty costs.
note payable due January 1, 2014. (this is Long Term Liability
|The balance sheet is sometimes referred as the:||Statement of Financial Position|
|Companies rarely use estimates in valuing items on the balance sheet.||False, Companies use judgments and estimates to determine many of the items reported on the balance sheet.|
|The correct order to present current assets is?||Cash, accounts receivable, inventories, prepaid items.|
|The basis for classifying assets as current or non-current is the period of time normally required by the accounting entity to convert cash invested in||inventory back into cash, or 12 months, whichever is longer, The basis for classifying assets as current or non-current is the period of time normally required to convert cash invested in inventory back into cash, or 12 months, whichever is longer.|
|Current assets are presented in the balance sheet in order of:||liquidity, describes the amount of time that is expected to elapse until an asset is realized or otherwise converted into cash or until a liability has to be paid.|
|Which of the following investments should always be reported as current assets?||Trading securities, (debt and equity securities bought and held primarily for sale in the near term to generate income on short-term price differences.)|
|All of the following are stockholders' equity sections reported in the balance sheet except:||dividends, Dividends are reported in the statement of stockholders' equity but are not a section of stockholders' equity reported on the balance sheet.|
|A liability that is payable within the next year is sometimes included in long-term debt||True, A liability that is payable within the next year is sometimes included in long-term debt if the company expects to refinance the debt through another long-term issue or to retire the debt out of non-current assets.|
|The excess of total assets over total liabilities is referred to as net working capital.||False, Net working capital is the excess of total current assets over total current liabilities.|
|Assets can be divided into how many subclassifications?||5, current, long-term investments, PP & E, intangibles, and other.|
|Which of the following is not one of the portfolio groupings for investments in debt and equity securities?|| ***Investments***|
Held to maturity
|Which of the following would be reported in the investments section of the balance sheet?|| Patent.|
**Land held for future development.***
Equipment held for sale.
|Which of the following would be reported as a long-term asset at December 31, 2012?|| Land held for speculative purposes.|
***Equipment used in the manufacturing process.****
Held to maturity securities maturing in 2015.
Building held for sale.
|Which of the following are acceptable balance sheet formats?||Report form and account form.|
|Which of the following balance sheet formats lists the assets on the left side of the page and the liabilities and stockholders' equity on the right side?||The account form lists assets on the left and liabilities and stockholders' equity on the right.|
|The balance sheet format listing liabilities and stockholders' equity directly below assets is called the:||The report form|
|what are the Elements of the balance sheet?||Assets- probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.|
Liabilities- Probable future sacrifices of economic benefits arising from presetn obligations of a particular enttity
Equity- Residual interest in the assets of an entity that remains after duducting its liabilities.
|Current Asset are:||Cash and other assets a company expects to convert into cash, sell, or consume either in one year or in the operating cycle, wichever is longer.|
|Current assets are presented in the balance sheet in order of liquidity:|| -Cash and cash equivalents|
*(cash equivalents are short-term highly liquid investments that will mature within 3 months or less.
|Short-term investments||Held to maturity- (current or noncurrent) debt securities that a company has the positive intent and ability to hold to maturity. (Report at amortized cost) |
Trading- (Current) debt and equity securities bought and held primarily for sale in the near term to generate income on short-term
Available for sale- debt and equity securities not classified as held-to-maturity or trading securities
|The issuance of stock and the payment of dividends are||financing activities.|
|Making and collecting loans and disposing of property, plant, and equipment are||investing activities.|
|Activities that involve the cash effects of transactions entering into the determination of net income are classified as:||operating activities.|
|Investing activities on the statement of cash flows include the purchase of debt and equity securities.||True, The purchase of debt and equity securities is reported as an investing activity on the statement of cash flows.|
|Payment of interest expense would come under which activity on the statement of cash flows?||Operating.|
|Payment of a cash dividend would be reported as a cash outflow in which of the following sections:||financing activities.|
|The last step in preparing the statement of cash flows is to:||reconcile the change in cash with the beginning and the ending cash balances.|
|The cash debt coverage ratio is computed by dividing net cash provided by operating activities by average||total liabilities.|
|Indicators of strong financial flexibility include a low debt coverage ratio and negative free cash flow||False, A lower debt coverage ratio and negative free cash flow are indicators of poor financial flexibility.|
|Which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure?||Long-term liabilities, Due to their various covenants and restrictions, long-term liabilities normally require the greatest supplementary disclosure.|
|A generally accepted account title is:||Appropriation for Contingencies.|
|Which of the following is not a type of information that is supplemental to amounts presented in the balance sheet?|| Accounting policies.|
**Balance sheet format.***
|Similarities between IFRS and U.S. GAAP requirements for balance sheet presentation include all of the following except:||both require that changes to the valuation reserve be disclosed in the notes to the financial statements.|
|All of the following are accepted techniques of disclosure except:||Footnotes|