Quiz 2 - Balance Sheet

At the end of Year 1, the balance sheet for the Rich Food Restaurant showed cash at $20,000. At the end of Year 2, the balance sheet showed $40,000 in cash. A horizontal analysis of the balance sheets would show the absolute difference between the two years as:

a. $60,000. b. $20,000. - Answer c. 100%. d. 50%.

Which of the following expresses a limitation of the balance sheet?

a. The accuracy of a balance sheet varies with the profitability of the business. b. A balance sheet's valuation of purchased goodwill is subject to the accountant's personal bias. c. The balance sheet reflects only the business's human resource investment and not its return on that investment. d. The balance sheet does not reflect the current values of some assets.- Answer

The hotel building would be classified on a firm's balance sheet as:

a. a current liability. b. an investment. c. property and equipment. - Answer d. other assets.

China, glassware, etc., purchased and placed in storage for future use as needed should generally be recorded as __________ in accordance with the Uniform System of Accounts for the Lodging Industry.

a. a liability b. an expense c. other assets - Answer d. property and equipment

Which of the following items is not shown on the balance sheet of a hospitality company?

a. accounts payable b. accounts receivable c. purchased goodwill d. human resources value - Answer

Current assets are generally listed on the balance sheet in:

a. alphabetical order. b. order of liquidity. - Answer c. numerical order with the smallest amount first. d. no particular order.

Which of the following are included in common-size balance sheets?

a. current assets as a percentage of total assets - Answer b. current assets as a percentage of current liabilities c. the difference between current assets this year and current assets last year d. the percentage change between current assets last year and current assets this year

Trade payables are generally shown on a balance sheet as:

a. current liabilities. - Answer b. noncurrent liabilities. c. other liabilities. d. part of owners' equity.

Which of the following is not a current liability?

a. deferred income taxes- Answer b. advance deposits on rooms c. payables resulting from the purchase of services d. obligations relating to fixed asset purchases to be paid in the current period

Which generally accepted accounting principle requires that a footnote section be a part of the financial statement presentation?

a. full disclosure principle - Answer b. materiality principle c. business entity principle d. consistency principle

Which of the following approaches to balance-sheet analysis compares the balance sheets of several periods with the balance sheet of one selected period?

a. horizontal analysis b. vertical analysis c. base-year comparisons - Answer d. ratio analysis

Which type of balance sheet analysis sets total assets at 100%?

a. horizontal analysis b. vertical analysis - Answer c. base-year comparisons d. ratio analysis

The current bank loan agreement between the Travel Hotel and the local Bigbucks Bank stipulates a current ratio of 2 to 1. Which of the following financial statements would the bank review on a periodic basis to ensure that the hotel is in compliance with terms of the loan?

a. income statement b. balance sheet - Answer c. statement of cash flows d. aging of accounts receivable report

Which of the following financial statements reflects the financial position of the hospitality operation on a given date?

a. income statement b. balance sheet - Answer c. statement of cash flows d. aging of accounts receivable report

Under which of the following categories are prepaid expenses reported on the balance sheet?

a. investments b. noncurrent receivables c. current assets - Answer d. current liabilities

The section of the balance sheet that changes with the method of business organization is:

a. owners' equity. - Answer b. noncurrent liabilities. c. current liabilities. d. assets.

The ability of a business to pay its future obligations depends, in part, on:

a. the ratio of current assets to long-term assets. b. the relative amounts of long-term financing by owners and creditors. - Answer c. whether the business's total liabilities and owners' equity equal total assets. d. whether the business's current assets are depreciated.