Acc 321
On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a current asset?
$12,000
On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a noncurrent asset?
$24,000
Indicate the order of the following current assets on the balance sheet.
1-cash and cash equivalents 2-accounts receivable 3-inventory 4-prepaid expenses
Which of the following should be classified as current liabilities?
Account payable Current maturities of long-term debt
result from the sale of goods or services on credit. (Enter one word per blank
Account receivable
An obligation to pay a supplier within 30 days should be recorded in payable, whereas a signed promise to pay cash at some point in the future should be recorded as payable.
Accounts;notes
The full-disclosure principle requires that financial statements report which of the following?
All material relevant information.
What is the difference between an account payable and a note payable?
An account payable is usually due in 30-60 days.
An accrued liability represents which of the following?
An expense that has been incurred but will be paid in a future period.
How should liquid investments expected to be converted to cash within the current operating cycle be reported in the balance sheet?
As a short-term investment in the current asset section.
Bear Corp. has $100,000 cash in the bank restricted to repay a note payable that matures in 2 years. How should this $100,000 be reported?
As restricted cash in the long-term section of the balance sheet.
Long-term are obligations that will not be satisfied in the next year or operating cycle, whichever is longer. (Enter only one word.)
Asset
Which of the following items is classified as cash?
Bank drafts
A company's assets minus its liabilities shown on the balance sheet is referred to as its value.
Book
Which of the following is a likely example of a related-party transaction?
Borrowing or lending money at unusually low interest rates.
Current assets include which of the following?
Cash and short-term investments
The two classifications used for assets and liabilities on the balance sheet are and Select Your Answer equity; nonequity monetary; nonmonetary © current: noncurrent O fixed; variable
Current and noncurrent
A is satisfied within 1 year or the current operating cycle, whichever is longer.
Current liability
A customer pays in advance for services to be performed in a future period. In which account should the transaction be recorded?
Deferred revenue
Which of the following are required SEC disclosures?
Director compensation Executive stock option information Executive compensation
Sustainability Disclosures include
Environment Government Social
True or false: Investments are assets used directly in the operations of the business.
False
Inventories include which of the following items? (Select all that apply.)
However, the inventory of a manufacturer will include not only finished goods but also goods in the course of production (work in process) and goods to be consumed directly or indirectly in production (raw materials).
Which of the following transactions would be recorded as a prepaid expense?
Insurance paid for 6 months. Rent for an office building paid for 12 months.
Patents, copyrights, and franchises are examples of what?
Intangibles
Which of the following items should be classified as a short-term investment?
Investments to be sold in 12 months.
What is the criterion to classify an investment as a cash equivalent versus a short-term investment? Select Your Answer It is an investment in stock of another company that is held for active trading. It is a highly liquid investment with a maturity date of 3 months or less from date of purchase. It is a marketable security being held for sale. It is a short-term investment with a maturity date of 12 months or less.
It is a highly liquid investment with a maturity date of 3 months or less from date of purchase.
The Management Discussion and Analysis section of the financial statements includes a perspective on which of the following?
Liquidity Capital resources Operations
An analysis provided by the company's management is included in the
Management discussion and analysis
The full-disclosure principle requires financial statements to provide all _______ ________ information regarding the company.
Material and relevant
Which of the following investments would be classified as a cash equivalent?
Money market funds U.S. Treasury bills with a maturity of 90 days
Which of the following items are considered cash equivalents?
Money market funds that are quickly converted to cash. Commercial paper due in 1 month. U.S. Treasury bills due in 2 months.
Which of the following items are considered cash equivalents? (Select all that apply.)
Money market funds that are quickly converted to cash. U.S. Treasury bills due in 2 months. Commercial paper due in 1 month
What does a liability represent?
Obligations owed to other entities
Which of the following are examples of prepaid expenses?
Prepay rent in advance Prepay insurance
A manufacturing firm will use which of the following accounts to record inventory? (Select all that apply.)
Raw materials Work in process Finished goods
Reports that communicate the environmental, social, and governance factors of an organization's activities are called:
Sustainability report
Property, plant, and equipment is a(n) asset.
Tangible Long-lived
Which of the following items are included in the professional opinions given in the auditor's report?
The effectiveness of internal control. The fairness of the financial statements.
How are current liabilities satisfied? (Select all that apply.)
The use of current assets. The creation of other current liabilities.
Why are inventories reported as current assets?
They are normally sold within the operating cycle.
What is the role of the auditor?
To attest to the fairness of the financial statements.
True or false: The operating cycle for most firms is 1 year or less.
True
An expense that has been incurred but not yet paid results is a(n)
accrued liability
Zantron Corp. pays $100,000 for robotic equipment to be used in its production facility. Zantron should include this transaction as
an increase in plant, property, and equipment.
Current —- include cash and other items that will be converted to cash or consumed within the coming year. (Enter only one word.)
assets
Which of the following financial statements shows a firm's financial position on a particular date?
balance sheet
Which of the following are noncurrent assets?
building land intangible assets
Money on hand and in banks that is available for use in the operations of the business is shown in the account on the balance sheet. (Enter only one word.)
cash
What is included in a company's paid in capital?
common stock and additional paid-in capital
In a balance sheet, how are assets classified?
current and noncurrent
How are accounts receivable classified on the balance sheet?
current asset
Inventories held for sale in the normal course of business are classified in the balance sheet as
current assets
Deferred revenues and accrued salaries payable are examples of what?
current liabilities
The risk that a company will not be able to pay its obligations when they come due is referred to as ________ risk
default
Shareholders' equity arises primarily from amounts invested by shareholders and amounts
earned by the corporation
The SEC requires disclosures on compensation for which of the following?
executives, directors
The purpose of the balance sheet is to report
financial position of a business at a particular point in time
Which of the following are included in inventory?
finished goods, work in process, raw materials
Unearned revenue represents cash received from a customer for goods or services to be provided in _________ period
future
Which of the following should be classified as current liabilities?
income taxes payable accrued warranties unearned revenues
Ownership of an exclusive right to something such as a product, a process, or a name is called what?
intangible asset
Assets not used directly in the operations of the business are referred to as
investments
Cash set aside for future plant expansion and a 3 year note receivable are both examples of what on a company's balance sheet?
investments
An investment should be classified as current on the balance sheet if (Select all that apply.) Select All That Apply I it will be sold within 12 months. management has the intent and ability to liquidate it in the near term. it is an investment of stock of another company regardless of maturity. O it does not have a maturity date.
it will be sold within 12 months. management has the intent and ability to liquidate it in the near term.
The criteria used to determine if a liability should be classified as long-term is
it will not be satisfied within 12 months or the operating cycle, whichever is longer.
What asset is listed as a separate item on the balance sheet because it has an unlimited life and is not depreciated?
land
Obligations to other entities are known as what?
liabilities
Obligations to other entities are classified as____ on the balance sheet
liability
Common practice requires that current assets are presented on the balance sheet in the order of . (Enter only one word.)
liquidity
The balance sheet provides useful information about a company's and long-term solvency. (Enter only one word.)
liquidity
Which of the following items should be disclosed in other long-term assets on the balance sheet?
long-term prepaid expenses noncurrent investments that are not material
Responsibility for the financial statements and other information found in the annual report lies with _________.
management
Who is responsible for the information in the annual report?
management company
A —- firm will include finished goods, work in process, and raw materials as part of their inventory.
manufacturing
Assets minus liabilities, measured according to GAAP, is not likely to be representative of the —value of the entity.
market
Which of the following are included in the summary of significant accounting policies included in the notes to the financial statements?
method of depreciation items included in cash and cash equivalents choice between LIFO and FIFO
Any receivable not expected to be collected within one year or the operating cycle, whichever is longer, is classified as a
noncurrent asset
Rice Company purchases a building for $500,000, which will be used as a production facility. How should the building be classified on the balance sheet?
noncurrent asset
Which of the following items are included in investments?
note receivable due in 5 years cash reserved to purchase land
Which of the following items are included in property, plant, and equipment?
oil wells furniture machines mineral mines
The time period necessary to convert cash to raw materials, convert raw materials into finished products, sell the products, and collect on the account receivable is referred to as the cycle. Select Your Answer O production operating O collection O liquidity
operating
How are property, plant, and equipment presented on the balance sheet?
original cost less accumulated depreciation
If a company's long-term investments are not material in amount, where should they be disclosed on the balance sheet?
other assets
The accounts common stock and paid-in capital in excess of par are classified as
paid-in capital
Which of the following are noncurrent assets?
property machines investments with maturity of 18 months
Borrowing or lending money at an interest rate significantly different from the market interest rate is a likely example of a(n) ______ ________ transaction
related party
Which of the following items should not be included in cash and cash equivalents in the balance sheet?
restricted cash
Investments are reported as investments when the company has both the intent and ability to sell within one year (or operating cycle).
short term
Classifying items on the balance sheet as current and noncurrent assists financial statement users in assessing what aspects about a company?
solvency and liquidity
A ______ event is a significant development that occurs after a company's fiscal year-end but before the financial statements are issued or available to be issued.
subsequent
Which of the following are common characteristics of property, plant, and equipment?
tangible used in normal operations long-lived
Which of the following are characteristics of plant, property, and equipment?
tangible used long-term in production
Accounts receivable represents which of the following?
the amount owed by customers
A summary of significant accounting policies includes information regarding
the choice of accounting policies
Assets are classified as long-term if:
they are expected to be converted to cash or consumed in more than one operating cycle
Which type of audit opinion indicates the financial statements are prepared in accordance with U.S. GAAP?
unqualified
