Chapter 6 MC

Where does Accumulated Other Comprehensive Income appear? A. On the balance sheet in the shareholders' equity section B. On the balance sheet in the long-term liabilities section C. On the income statement after net income D. On the balance sheet as a long-term asset

A

Which of the following best describes the concept of liquidity? A. It is a measure of an asset's ability to be quickly converted to cash without risk of loss. B. It is a measure of a firm's long-term ability to pay its obligations as they mature. C. It indicates an entity's ability to respond to unexpected needs. D. It indicates a firm's ability to take advantage of opportunities by taking actions that alter the amounts and timing of cash flows.

A

Which of the following is a current asset? A. Treasury bill acquired with 2 months to maturity B. Land held for investment C. Equipment D. Goodwill

A

Which of the following statements regarding balance sheet presentation is true? A. IFRS does not prescribe the ordering of liabilities within current and noncurrent groups. B. The account format lists liabilities and shareholders' equity directly below the assets. C. The report format lists liabilities and shareholders' equity on the right side of the statement. D. U.S. GAAP allows assets to be listed in either increasing or decreasing order of liquidity.

A

Webb Corporation's trial balance for July 31, the end of its fiscal year, included the following accounts: Accounts receivable 34,000 Inventories 52,000 Franchise 38,000 Investments 48,000 Prepaid Insurance 5,000 Note receivable 96,000 Cash in bank 6,000 The investments account consists of marketable securities of which management plans to sell half of by December 31. The rest of the securities will be held longer than one year. Prepaid insurance is a two-year policy that was purchased on July 31. The note receivable is an installment note that will be paid in three equal installments on December 31 of each year. The amounts that should be classified as current assets in the July 31 balance sheet is ______. A. $150,500 B. $153,000 C. $180,500 D. $214,500

A Accounts receivable 34,000 + inventories 52,000 + investments (48,000/2) + prepaid insurance (5,000/2) + note receivable (96,000/3) + cash in bank 6,000 = 150,500

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. Debit Credit Accounts receivable-trade 730 Building and equipment 1,030 Cash in bank-operating 59 Interest receivable 45 - due in 1 month Installment receivables 70 - due in 6 months Merchandise inventory 35 Land 310 Notes receivable - long-term 535 Petty cash 18 Prepaid expenses-current 42 Supplies 29 Patent 70 Accounts-payable 635 Accumulated depreciation 235 Additional paid-in capital 610 Allowance for uncollectible accounts 65 Cash dividends payable 70 Common stock-$1 par value 55 Income tax payable 95 Notes payable-2 years 910 Retained earnings 75 Unearned revenues-2 years 95 Cash dividends declared 250 Service revenue 578 Operating expenses 200 Totals 3,423 3,423 What are total assets for San Marcos Corporation? A. $2,573 B. $2,618 C. $2,628 D. $2,673

A Accounts receivable trade 730 + Cash in bank 59 + interest receivable 45 + installment receivables 70 + merchandise inventory 35 + petty cash 18 + prepaid expenses 42 + supplies 29 - allowance for uncollectible accounts 65 + building and equipment 1,020 + land 300 + notes receivable-long term 525 + patent 60 - accumulated depreciation 225 = 2,573

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. Debit Credit Accounts receivable-trade 730 Building and equipment 1,030 Cash in bank-operating 59 Interest receivable 45 - due in 1 month Installment receivables 70 - due in 6 months Merchandise inventory 35 Land 310 Notes receivable - long-term 535 Petty cash 18 Prepaid expenses-current 42 Supplies 29 Patent 70 Accounts-payable 635 Accumulated depreciation 235 Additional paid-in capital 610 Allowance for uncollectible accounts 65 Cash dividends payable 70 Common stock-$1 par value 55 Income tax payable 95 Notes payable-2 years 910 Retained earnings 75 Unearned revenues-2 years 95 Cash dividends declared 250 Service revenue 578 Operating expenses 200 Totals 3,423 3,423 What are current assets of San Marcos Corporation? A. $963 B. $1,028 C. $1,010 D. $1,433

A Accounts receivable trade 730 + Cash in bank 59 + interest receivable 45 + installment receivables 70 + merchandise inventory 35 + petty cash 18 + prepaid expenses 42 + supplies 29 - allowance for uncollectible accounts 65 = 963

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Accounts Receivable

A C

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Investment in A Company (to be sold in 6 months)

A C

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Supplies

A C

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Copyright

A NC

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Land

A NC

Which of the following is not a cash equivalent? A. Commercial paper acquired with 75 days to maturity B. Bond sinking fund C. Money market funds D. Treasury bill acquired with 30 days to maturity

B

Which of the following is not a component of shareholders' equity? A. Common Stock B. Dividends Payable C. Additional Paid-In Capital D. Treasury Stock

B

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. Debit Credit Accounts receivable-trade 730 Building and equipment 1,030 Cash in bank-operating 59 Interest receivable 45 - due in 1 month Installment receivables 70 - due in 6 months Merchandise inventory 35 Land 310 Notes receivable - long-term 535 Petty cash 18 Prepaid expenses-current 42 Supplies 29 Patent 70 Accounts-payable 635 Accumulated depreciation 235 Additional paid-in capital 610 Allowance for uncollectible accounts 65 Cash dividends payable 70 Common stock-$1 par value 55 Income tax payable 95 Notes payable-2 years 910 Retained earnings 75 Unearned revenues-2 years 95 Cash dividends declared 250 Service revenue 578 Operating expenses 200 Totals 3,423 3,423 What are current liabilities of San Marcos Corporation? A. 710 B. 770 C. 795 D. 855

B Accounts payable 625 + cash dividends payable 60 + income tax payable 85 = 770

Presented below are selected accounts for San Marcos Corporation for December 31 of the current year. Debit Credit Accounts receivable-trade 730 Building and equipment 1,030 Cash in bank-operating 59 Interest receivable 45 - due in 1 month Installment receivables 70 - due in 6 months Merchandise inventory 35 Land 310 Notes receivable - long-term 535 Petty cash 18 Prepaid expenses-current 42 Supplies 29 Patent 70 Accounts-payable 635 Accumulated depreciation 235 Additional paid-in capital 610 Allowance for uncollectible accounts 65 Cash dividends payable 70 Common stock-$1 par value 55 Income tax payable 95 Notes payable-2 years 910 Retained earnings 75 Unearned revenues-2 years 95 Cash dividends declared 250 Service revenue 578 Operating expenses 200 Totals 3,423 3,423 What is working capital for San Marcos Corporation? A. 115 B. 163 C. 298 D. 628

B Accounts receivable trade 730 + Cash in bank 59 + interest receivable 45 + installment receivables 70 + merchandise inventory 35 + petty cash 18 + prepaid expenses 42 + supplies 29 - allowance for uncollectible accounts 65 = 963 Accounts payable 625 + cash dividends payable 60 + income tax payable 85 = 770 963-770=163

Hendrickson Corporation's trial balance for July 31, the end of its fiscal year, included the following accounts: Accounts Receivable 21,000 Inventories 57,000 Copyright 18,000 Investments 41,000 Prepaid Insurance 6,000 Note receivable, due in two years 74,000 Cash in bank 4,500 Investments are treasury bills that were purchased in May and mature on August 15. Prepaid insurance is a three-year policy that was purchased on July 31. The amount that should be classified as currents assets in the July 31 balance sheet is _____. A. $129,500 B. $125,500 C. $82,000 D. $199,500

B Accounts receivable 21,000 + inventories 57,000 + investments 41,000 + prepaid insurance (6,000/3) + cash in bank 4,500 = 125,500

The statement of cash flows enables financial statement users to do all of the following except _____. A. Assess an entity's ability to pay liabilities and dividends B. Determine the extent to which an entity will require external financing C. Assess the collectability of existing accounts receivable D. Reconcile differences between net income and the associated cash receipts and payments

C

Glover Corporation's trial balance for December 31, the end of its fiscal year, included the following accounts: Accounts payable 40,000 Dividends payable 22,000 Bond payable, maturing in 9 years 36,000 Salaries payable 9,000 Note payable, due in 1 year 30,000 Note payable, due in 5 years 60,000 The amount that should be classified as current liabilities on Glover's December 31 balance sheet is _____. A. $71,000 B. $79,000 C. $101,000 D. $161,000

C Accounts payable 40,000 + dividends payable 22,000 + salaries payable 9,000 + note payable, due in 1 year 30,000 = 101,000

If an entity can borrow funds to meet an unexpected financial crisis, it exhibits high _____. A. Liquidity B. Solvency C. Stability D. Financial flexibility

D

Which of the following is not a current liability? A. Income tax payable B. Accounts payable C. Subscriptions collected one year in advance D. Bond sinking fund

D

Which of the following is not a limitation of the balance sheet? A. Many balance sheet accounts are reported at historical cost instead of market values or liquidation values. B. A number of assets and liabilities, such as human capital and reputation, are not reported on the balance sheet. C. Many balance sheet accounts are based upon estimates as opposed to determinable amounts. D. Many of the balances are reported at their liquidation values.

D

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Accounts Payable

L C

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Wages Payable

L C

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Bonds Payable due in 10 years

L NC

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Additional Paid-In Capital

SE NA

Assets, Liabilities, or Shareholders' Equity Current, Non-Current, Not applicable Retained Earnings

SE NA