ACC 401 SB3
On January 1, Year 1, Renquist Corp. borrowed $100,000 by signing a 5-year interest bearing note payable with annual interest of 8%. The terms of the contract require Renquist to repay the principal over 5 years with a payment of $20,000 made at the end of each year. On December 31, Year 1, Renquist made the first payment plus interest. What portion of the note should be classified as current liabilities?
$20,000
On January 1, Year 1, Renquist Corp. borrowed $100,000 by signing a 5-year note payable with annual interest of 8%. The terms of the contract require Renquist to repay the principal over 5 years with a payment of $20,000 made at the end of each year. On December 31, Year 1, Renquist made the first payment plus interest. On January 1, Year 2, what portion of the note should be classified as noncurrent liabilities?
$60,000
Total noncurrent assets on the balance sheet is
$60,000.
What is Crazen's quick or acid-test ratio?
0.70
What is Crazen's current ratio?
1.2
Coral Company has the following financial statement information:
1.50
Skylark has the following information in its financial statements:
1.6
Linton Company has the following financial statement information:
4.0
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.
_____ _____ result from the sale of goods or services on credit.
Blank 1: Accounts or Account Blank 2: Receivable, Receivables, Recievable, or Recievables
The current ratio is expressed as current _____ divided by current _____,
Blank 1: assets Blank 2: liabilities
Investments are reported as _____ when the company has both the intent and ability to sell within one year (or operating cycle).
Blank 1: current, short-term, or short term
Investments are reported as _____ when the company has both the intents and ability to sell within one tea4.
Blank 1: current, short-term, or short term
If am accounts is receipt within the 60s, essay
Blank 1: current, short-term, or short-term
A(n) _____ occurs when the auditor does not have sufficient information to express an opinion. (Enter only one word.)
Blank 1: disclaimer
Unearned revenue represents cash received from a customer for goods or services to be provided in a(n) _____ period.
Blank 1: future, subsequent, or later
Assets not used directly in the operations of the business are referred to as _____.
Blank 1: investments or investment
Long-term _____ are obligations that will not be satisfied in the next year or operating cycle, whichever is longer. (Enter only one word.)
Blank 1: liabilities or liability
Obligations to other entities are classified as _____ on the balance sheet.
Blank 1: liabilities or liability
The debt to equity ratio is calculated as total _____ divided by shareholders' equity.
Blank 1: liabilities, liability, or debt
Common practice requires that current assets are presented on the balance sheet in the order of _____
Blank 1: liquidity
Retained earnings represents the accumulated _____ _____ reported since the inception of the corporation and not yet paid to shareholders as dividends.
Blank 1: net Blank 2: income
The _____ cycle refers to the period of time necessary to convert cash to raw materials, raw materials to a finished product, the finished product to receivables, and then receivables back to cash.
Blank 1: operating
A(n) _____ audit opinion occurs when there is an exception to the standard opinion but not of sufficient seriousness to invalidate the whole of the financial statements. (Enter only one word.)
Blank 1: qualified
The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as _____ _____.
Blank 1: retained Blank 2: earnings
current assets.
Cash and other assets that are reasonably expected to be converted to cash or consumed within 1 year or the current operating cycle are classified as
Blank 1: liquidity
Common practice requires that current assets are presented on the balance sheet in the order of _____.
You are analyzing the following four companies based on their debt to equity ratio. Which company has the highest risk of insolvency? Company A 2.5 Company B 1.0 Company C 0.9 Company D 3.0
Company D
Short term investments Cash
Current assets include which of the following? (Select all that apply.)
Deferred revenues and accrued salaries payable are examples of what?
Current liabilities
Which of the following opinions is necessary when the auditor finds exceptions that are so material that the financial statements may be misleading?
Current ratio
True or false: Accounts receivable result from the sale of goods or services for cash.
False
True or false: Investments are assets used directly in the operations of the business.
False
True or false: The debt to equity ratio is calculated as total liabilities divided by common stock.
False
Cash and cash equivalents Accounts receivable Inventory Prepaid expenses
Indicate the order of the following current assets on the balance sheet.
Patents, copyrights, and franchises are examples of what?
Intangibles
Assets not used directly in the operations of the business are called what?
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
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?
It is a highly liquid investment with a maturity date of 3 months or less from date of purchase.
What situation would require an auditor to use an explanatory paragraph in the auditor's report, even though the report is unqualified?
Lack of consistency due to a change in accounting principle.
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
On the balance sheet, current assets are listed in the order of their what?
Liquidity
What refers to the riskiness of a company with regard to the amount of liabilities in its capital structure?
Long-term solvency
Which of the following items are considered cash equivalents? (Select all that apply.)
Money market funds quickly converted into cash. Commercial paper due in less than 3 months.
How are property, plant, and equipment presented on the balance sheet?
Original cost less accumulated depreciation
Current assets include which of the following?
Short term investments Cash
Short-term investments are sometimes called which of the following?
Short-term marketable securities Temporary investments
An "unqualified" audit opinion represents which of the following?
The financial statements are fairly presented in conformity with generally accepted accounting principles.
operating
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.
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.
True or false: The debt to equity ratio indicates the extent to which a company relies on creditors to provide resources for the company.
True
True
True or false: The operating cycle for most firms is 1 year or less.
Which of the following items are considered cash equivalents?
U.S. Treasury bills due in 2 months. Commercial paper due in 1 month. Money market funds that are quickly converted to cash.
Which of the following situations would require an explanatory paragraph even though the auditors' report is unqualified? (Select all that apply.)
Uncertainty regarding a contingency for which a loss is material in amount. A significant matter concerning the financial statements and a related-party transaction.
Which type of audit opinion indicates the financial statements are prepared in accordance with U.S. GAAP?
Unqualified
Money market funds U.S. Treasury bills with a maturity of 90 days
Which of the following investments would be classified as a cash equivalent? (Select all that apply.)
Money market funds quickly converted into cash. Commercial paper due in less than 3 months.
Which of the following items are considered cash equivalents? (Select all that apply.)
Bank drafts
Which of the following items is classified as cash?
restricted cash
Which of the following items should not be included in cash and cash equivalents in the balance sheet?
Which of the following should be classified as current liabilities? (Select all that apply.)
accounts payable accrued salaries current maturities of long-term debt income taxes payable accrued warranties unearned revenues
Which of the following opinions is necessary when the auditor finds exceptions that are so material that the financial statements may be misleading?
adverse
Which of the following items are included in property, plant, and equipment? (Select all that apply.)
buildings land natural resources
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?
cash
Which of the following items should be included in cash on the balance sheet? (Select all that apply.)
cash on hand cashier's checks money orders
Which of the following items are included in investments? (Select all that apply.)
cash reserved to purchase land note receivable due in 5 years
Which of the following items should be classified as investments on the balance sheet? (Select all that apply.)
cash restricted to purchase building note receivable due in 3 years investments in stock of another company
Which of the following accounts represent amounts shareholders have invested in the company? (Select all that apply.)
common stock additional paid-in capital
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
A ______ is satisfied within 1 year or the current operating cycle, whichever is longer.
current liability
The portion of a long-term note that is due and payable within the next 12 months should be reported on the balance sheet as a:
current liability
A ratio used to measure liquidity is the
current ratio.
What account is affected when a customer pays in advance for services to be performed in the future?
deferred revenues
Which of the following will be given if an auditor believes that insufficient evidence has been gathered to successfully express an opinion on the financial statements?
disclaimer
The higher the debt to equity ratio is for a company, then the ______ the risk of insolvency is for that company.
higher
An asset that has no physical substance is referred to as a(n) ______ asset.
intangible
Land is listed separately on the balance sheet because
it has an unlimited life.
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.
Which of the following are noncurrent assets? (Select all that apply.)
land building intangible assets investments with maturity of 18 months machines property
The current ratio and the quick ratio are used to measure _____ of a company indicating the ability to pay current obligations. (Enter only one word.)
liquidity
All investment should be classified as current on the balance sheet if
management has the intent and ability to liquidate it in the near term. it will be sold within 12 months.
An investment should be classified as current on the balance sheet if (Select all that apply.)
management has the intent and ability to liquidate it in the near term. it will be sold within 12 months.
Which of the following items are included in property, plant, and equipment? (Select all that apply.)
mineral mines oil wells furniture machines
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
Any receivable not expected to be collected within one year or the operating cycle, whichever is longer, is classified as a
noncurrent asset.
The accounts common stock and paid-in capital in excess of par are classified as
paid-in capital.
Which of the following items are included in the numerator for the current ratio but are excluded from the numerator of the quick or acid-test ratio? (Select all that apply.)
prepaid assets inventory
Which of the following opinions is used when an auditor has an exception to the standard opinion but there is not sufficient seriousness to invalidate the financial statements as a whole?
qualified
The _____ ratio provides a more rigorous indication of liquidity than does the _____ ratio.
quick; current
Investments in stock and debt securities of other corporations are included as _____ if the company has the ability and intent to sell them within the next 12 months.
short-term investments
If a company has a large amount of long-term debt in its capital structure, this will affect the firm's ______.
solvency
The ability to pay its long-term debts as they become due is referred to as ______ of the company.
solvency
Goodwill is calculated as
the acquisition price above the fair value of the identifiable net assets acquired.
Assets are classified as long-term if:
they are expected to be converted to cash or consumed in more than one operating cycle
The debt to equity ratio is calculated as
total liabilities divided by total stockholders' equity.
Goodwill is shown on the balance sheet
when one company acquires another company for a price above the fair value of the assets acquired.