ACC 220 Chapter 3B Concept Overview Videos

If a company has total assets of $2,000, current assets of $500, current liabilities of $750, and total liabilities of $1,200, what is the company's debt-to-equity ratio? 0.625 0.375 0.600 1.500

1.500 Explanation Debt-to-equity = Total Liabilities / Total Equity. Total Liabilities = $1,200 and Total Equity = Total Assets - Total Liabilities or $2,000 - $1,200 = $800. $1,200 / $800 = 1.500.

The auditor has specific knowledge that financial statements or disclosures are seriously misstated or misleading.

Adverse

Which of the following statements about the balance sheet is correct? Balance sheets prepared under IFRS must now be titled "statement of financial position." International standards specify a minimum list of items to be presented in the balance sheet; U.S. GAAP has no minimum requirements. Most balance sheets prepared using IFRS report current items first. U.S. GAAP and IFRS require the presentation of current assets and liabilities before noncurrent assets and liabilities on the balance sheet.

International standards specify a minimum list of items to be presented in the balance sheet; U.S. GAAP has no minimum requirements. Explanation International standards changed the title of the balance sheet to "statement of financial position;" however, companies are not required to use that title.Under U.S. GAAP, we present current assets and liabilities before noncurrent assets and liabilities. International standards don't prescribe the format of the balance sheet, but balance sheets prepared using IFRS often report noncurrent items first.

There has been a departure from GAAP, but it not of sufficient seriousness to invalidate the financial statements as a whole.

Qualified

Financial statement items are converted to ratios for evaluating the performance and risk of a company.

Ratio analysis

The auditor believes the financial statements are in conformity with GAAP but wishes to draw attention to events subsequent to the balance sheet date.

Unqualified with emphasis paragraph

The auditor is not able to gather sufficient information that financial statements are in conformity with GAAP.

Disclaimer

Each item in a financial statement is expressed as a percentage of that same item in the financial statements of another year (base amount).

Horizontal analysis

The auditor believes the financial statements are in conformity with GAAP but there is a going concern situation.

Unqualified with explanatory paragraph

The current ratio is calculated by dividing: Current assets by total liabilities. Total assets by total liabilities. Current assets by current liabilities. Current assets by quick liabilities.

Current assets by current liabilities.

Each item in the financial statements is expressed as a percentage of an appropriate corresponding total, or base amount, but within the same year.

Vertical analysis