Accounting Chapter 2

(IFRS) 10 Under IFRS a. companies can apply fair value to property, plant, and equipment and natural resources. b. companies can apply fair value to property, plant, and equipment but not to natural resources. c. companies can apply fair value to neither property, plant, and equipment nor natural resources. d. companies can apply fair value to natural resources but not to property, plant, and equipment.

A

104 Which of the following is a measure of liquidity? a. Working capital b. Profit margin c. Earnings per share d. Debt to assets ratio

A

107 A short-term creditor is primarily interested in the __________ of the borrower. a. liquidity b. profitability c. consistency d. solvency

A

131 How can a company improve its current ratio? a. Work with a creditor to reclassify some current debt into long-term debt b. Collect accounts receivable c. Nothing can ethically be done to improve the current ratio d. Use excess cash to buy new equipment

A

132 Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If they pay $350,000 of their accounts payable, what will their new current ratio be? a. 3.6:1 b. 2.4:1 c. 4.5:1 d. 2.0:1

A

133 Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If they issue $150,000 of new stock, what will their new current ratio be? (rounded) a. 2.6:1 b. 2.1:1 c. 2.2:1 d. 2.4:1

A

134 Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $350,000 of their accounts payable, what will their new current ratio be? a. 3.1:1 b. 4.0:1 c. 1.5:1 d. 2.1:1

A

135 Mitchell Corporation has current assets of $1,600,000 and current liabilities of $750,000. If they issue $200,000 of new stock what will their new current ratio be? (rounded) a. 2.4:1 b. 1.9:1 c. 1.7:1 d. 2.13:1

A

140 In 2022, Grider Corporation had cash receipts of $56,000 and cash disbursements of $32,000. Grider's cash balance at December 31, 2022 was $78,000. What was Grider's January 1, 2022 cash balance? a. 54,000 b. 70,000 c. 110,000 d. 102,000

A

141 In 2022, Grider Corporation had cash receipts of $35,000, including additional owner investments of $10,000, and cash disbursements of $20,000. Grider purchased equipment of $12,000 on account. Grider's cash balance at December 31, 2022 was $65,000. What was Grider's January 1, 2022 cash balance? a. 50,000 b. 60,000 c. 85,000 d. 80,000

A

142 Suppose that Morgan Corporation produced and sold 4,800 laptop computers during 2022. It reported $130,000 cash provided by operating activities. In order to maintain production at 4,800 laptops, Morgan invested in $8,600 in equipment. Morgan paid $1,400 in dividends. What is Morgan's free cash flow? a. 120,000 b. 140,000 c. 137,000 d. 130,000

A

152 The two fundamental qualities of useful information are a. relevance and faithful representation. b. verifiability and timeliness. c. comparability and flexibility. d. understandability and consistency.

A

162 Accounting information should be neutral in order to enhance a. faithful representation. b. consistency. c. comparability. d. relevance.

A

165 Which of the following statements is not true? a. Comparability means using the same accounting principles from year to year within a company. b. Faithful representation is the quality of information that gives assurance that it is free of error. c. Relevant accounting information must be capable of making a difference in the decision. d. The primary objective of financial reporting is to provide financial information that is useful to investors and creditors for making decisions.

A

166 A company can change to a new method of accounting if management can justify that the new method results in a. more meaningful financial information. b. a higher net income. c. a lower net income for tax purposes. d. less likelihood of clerical errors.

A

170 Information is _________ if independent measures, using the same methods, obtain similar results. a. Verifiable b. Consistent c. Understandable d. Relevant

A

177 Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records? a. monetary unit assumption. b. historical cost principle. c. periodicity assumption. d. full disclosure principle.

A

184 Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Periodicity d. Economic entity

A

187 The Mac Company has four plants nationwide that cost $450 million. Accumulated depreciation on the plants is $100 million at December 31, 2022. The current fair value of the plants at that date is $300 million. The plants will be reported on the December 31, 2022 balance sheet at a. $350 million. b. $700 million. c. $300 million. d. $600 million.

A

60 An intangible asset a. derives its value from the rights and privileges it provides the owner. b. is worthless because it has no physical substance. c. is converted into a tangible asset during the operating cycle. d. cannot be classified on the balance sheet because it lacks physical substance.

A

62 In which balance sheet section would trademarks be reported? a. Intangible assets b. Investments c. Property, plant, and equipment d. Current assets

A

64 Which of the following would not be classified as a long-term liability? a. Current maturities of long-term debt b. Bonds payable c. Mortgage payable d. Lease liabilities

A

93 For 2022, Kuhl Co. reported net income of $36,000, net sales $400,000, and average shares outstanding of 16,000. No preferred dividends were paid. Earnings per share is a. 2.25 b. 0.44 c. 25 d. 0.09

A

96 Earnings per share is a a. profitability ratio. b. liquidity ratio. c. solvency ratio. d. trending ratio.

A

(IFRS) 8 Under IFRS a. comparative prior-period information must be presented, but financial statements need not be provided annually. b. comparative prior-period information must be presented, and financial statements must be provided annually. c. comparative prior-period information is not required, but financial statements need not be provided annually. d. comparative prior-period information is not required, but financial statements must be provided annually.

B

103 The relationship between current assets and current liabilities is important in evaluating a company's a. profitability. b. liquidity. c. market value. d. solvency.

B

105 Current assets divided by current liabilities is known as the a. working capital. b. current ratio. c. profit margin. d. capital structure.

B

109 Working capital is calculated by taking a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities.

B

110 Working capital is a measure of a. consistency. b. liquidity. c. profitability. d. solvency.

B

113 Working capital is a. calculated by dividing current assets by current liabilities. b. used to evaluate a company's liquidity and short-term debt paying ability. c. used to evaluate a company's solvency and long-term debt paying ability. d. calculated by subtracting current assets from current liabilities.

B

114 The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is a. leverage. b. liquidity. c. profitability. d. wealth.

B

129 Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks's financial statements that a. Bathlinks is getting a 27% return on its assets. b. there is a risk that Bathlinks cannot pay its debts as they come due. c. 73% of the assets are financed by the stockholders. d. based on this measure, the user should not invest in Bathlinks.

B

148 The agency of the United States Government that oversees the U.S. financial markets is the a. Internal Revenue Service. b. Security Exchange Commission. c. Financial Accounting Standards Board. d. International Auditing Standards Committee.

B

153 The convention of consistency refers to consistent use of accounting principles a. among firms. b. from period to period. c. throughout the current accounting period. d. within industries.

B

156 In order for accounting information to be relevant, it must a. have very little cost. b. help predict future events or confirm prior expectations. c. not be reported to the public. d. be used by many different firms.

B

157 Accounting information should be verifiable in order to enhance a. comparability. b. faithful representation. c. consistency. d. relevance.

B

161 Which of the following is not a quality associated with faithful representation? a. Complete b. Materiality c. Neutral d. All of these answer choices are correct.

B

163 Characteristics associated with relevant accounting information are a. comparability and timeliness. b. predictive value and confirmatory value. c. neutral and verifiable. d. consistency and understandability.

B

169 A company using the same accounting principles from year to year is an application of a. timeliness. b. consistency. c. full disclosure. d. materiality.

B

172 The assumption that requires that only those things that can be expressed in money are included in the accounting records is the a. economic entity assumption. b. monetary unit assumption. c. going concern assumption. d. periodicity assumption.

B

173 Which of the following is a constraint in accounting? a. Comparability b. Cost c. Consistency d. Relevance

B

175 For accounting information to have relevance, it must be a. consistent. b. timely. c. verifiable. d. understandable.

B

178 The principle that indicates that assets should be reported at the price that would be received to sell the asset is the a. historical cost principle. b. fair value principle. c. full disclosure principle. d. consistency principle.

B

180 It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the a. going concern assumption. b. economic entity assumption. c. monetary unit assumption. d. periodicity assumption.

B

185 The periodicity assumption states a. the business will remain in operation for the foreseeable future. b. the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared. c. every economic entity can be separately identified and accounted for. d. only those things that can be expressed in money are included in the accounting records.

B

188 The historical cost principle requires that when assets are acquired, they be recorded at a. fair market value. b. the amount paid for them. c. selling price. d. list price.

B

189 Valuing assets at their fair value rather than at their cost is inconsistent with the a. economic entity assumption. b. historical cost principle. c. periodicity assumption. d. full disclosure principle.

B

61 Which of the following is not considered an asset? a. Equipment b. Dividends c. Accounts receivable d. Inventory

B

66 Buildings are classified on the balance sheet as a. a current asset. b. property, plant, and equipment. c. an intangible asset. d. a long-term investment.

B

68 The operating cycle of a company is the average time that is required to go from cash to a. sales in producing revenues. b. cash in producing revenues. c. inventory in producing revenues. d. accounts receivable in producing revenues.

B

74 Ratios that measure the income or operating success of a company for a given period of time are a. liquidity ratios. b. profitability ratios. c. solvency ratios. d. trending ratios.

B

95 Earnings per share is calculated by dividing a. gross profit by average common shares outstanding. b. (net income less preferred dividends) by average common shares outstanding. c. net income by average common shares outstanding. d. net sales by average common shares outstanding.

B

(IFRS) 6 The subtotal net assets is used in a. both GAAP and IFRS. b. GAAP but not IFRS. c. IFRS but not GAAP. d. neither IFRS nor GAAP.

C

108 The current ratio is a. current assets plus current liabilities. b. current assets minus current liabilities. c. current assets divided by current liabilities. d. current assets times current liabilities.

C

111 Long-term creditors are usually most interested in evaluating a. liquidity. b. profitability. c. solvency. d. consistency.

C

112 A liquidity ratio measures the a. income or operating success of a company over a period of time. b. ability of a company to survive over a long period of time. c. short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash. d. percentage of total financing provided by creditors.

C

125 The debt to assets ratio is computed by dividing a. long-term liabilities by total assets. b. long-term liabilities by average assets. c. total liabilities by total assets. d. total liabilities by average assets.

C

127 Which of the following is not considered a measure of liquidity? a. Current ratio b. Working capital c. Debt to assets ratio d. Each of these answer choices are liquidity measures.

C

128 Which measure would a long-term creditor be least interested in reviewing? a. Free cash flow b. Debt to assets ratio c. Current ratio d. Solvency measure

C

130 Ace Company is a retail store. Due to competition, it is having trouble selling its products. Thus, inventory has been building up. Ace's current ratio has not changed for the past three years, in spite of the inventory buildup. Which of the following statements is true? a. As long as the current ratio remains constant, there is no need for concern. b. The composition of current assets and current liabilities does not matter. c. The management of Ace should consider the effect of slow moving inventory on its liquidity. d. Since inventory is a current asset, any increases should automatically cause the current ratio to rise.

C

136 The debt to assets ratio is a a. liquidity ratio. b. profitability ratio. c. solvency ratio. d. None of the answer choices is correct.

C

139 Free cash flow is net cash provided by operating activities a. less capital expenditures. b. less cash dividends. c. less capital expenditures and cash dividends. d. less capital expenditures and salaries expense.

C

146 Which of the following organizations issues accounting standards for countries outside the United States? a. SEC b. GAAP c. IASB d. FASB

C

147 Generally accepted accounting principles a. are accounting rules formulated by the Internal Revenue Service. b. are sound in theory but rarely used in real life. c. are accounting rules that are recognized as a general guide for financial reporting. d. have eliminated all errors in accounting.

C

150 Which one of the following is not an enhancing quality of useful information? a. Timeliness b. Understandability c. Materiality d. Comparability

C

154 The quality of consistency is a type of a. relevance. b. materiality. c. comparability. d. faithful representation.

C

155 Information that is presented in a clear fashion, so that users of that information can interpret it, is an example of a. relevance. b. faithful representation. c. understandability. d. comparability.

C

158 Accounting information is relevant to business decisions because it a. has been verified by external audit. b. is prepared on an annual basis. c. confirms prior expectations. d. is neutral in its representations.

C

164 Characteristics associated with faithfully representative accounting information are a. verifiable and timely. b. verifiable and neutral. c. complete and neutral. d. relevance and verifiable.

C

167 An item is considered material if a. it does not cost a lot of money. b. it is of a tangible good. c. its size is likely to influence the decision of an investor or creditor. d. the cost of reporting the item is greater than its benefits.

C

174 The accounting concept that indicates assets should be reported at the price that would be received to sell an asset is the a. economic entity assumption. b. monetary unit assumption. c. fair value principle. d. historical cost principle.

C

176 The periodicity assumption states that the economic life of a business can be divided into a. equal time periods. b. cyclical time periods. c. artificial time periods. d. perpetual time periods.

C

186 The TNT Company has five plants nationwide that cost $300 million. The current fair value of the plants is $500 million. The plants will be reported as assets at a. $200 million. b. $800 million. c. $300 million. d. $500 million.

C

190 Jackson Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated? a. Comparability b. Relevance c. Faithful representation d. Consistency

C

57 On a classified balance sheet, short-term investments are classified as a. intangible assets. b. property, plant, and equipment. c. current assets. d. long-term investments.

C

69 On a classified balance sheet, companies usually list current assets a. in alphabetical order. b. with the largest dollar amounts first. c. in the order in which they are expected to be converted into cash. d. in the order of acquisition.

C

70 On a classified balance sheet, intangible assets are a. listed directly under current assets on the balance sheet. b. not listed on the balance sheet because they do not have physical substance. c. listed after property, plant, and equipment. d. listed as a long-term investment on the balance sheet.

C

86 Kwantum Corporation has total assets of $3,600,000, common stock of $936,000, and retained earnings of $570,000 at December 31, 2022. What are the creditors' claims on their assets at that date? a. 3,234,000 b. 1,506,000 c. 2,094,000 d. 3,966,000

C

92 A measure of profitability is a. the current ratio. b. the debt to assets ratio. c. earnings per share. d. working capital.

C

(IFRS) 1 The classified balance sheet is a. required under GAAP but not under IFRS. b. required under IFRS in the same format as under GAAP. c. required under IFRS but not under GAAP. d. required under IFRS with certain variations in format as compared to GAAP.

D

(IFRS) 2 IFRS requires the use of a. the term balance sheet. b. the term statement of financial position. c. neither the term balance sheet nor the term statement of financial position, but recommends use of the term balance sheet. d. neither the term balance sheet nor the term statement of financial position, but recommends use of the term statement of financial position.

D

(IFRS) 3 IFRS a. requires a specific format for the balance sheet (statement of financial position) that is identical to U.S. GAAP. b. requires a specific format for the balance sheet (statement of financial position) that is different from U.S. GAAP. c. requires no specific format for the balance sheet (statement of financial position) but most companies that follow IFRS prepare the statement identical to U.S. GAAP . d. requires no specific format for the balance sheet (statement of financial position) but most companies that follow IFRS prepare the statement in a different format from U.S. GAAP.

D

(IFRS) 4 Most companies that follow IFRS present balance sheet (statement of financial position) information in this order. a. current assets; investments; property; plant and equipment; intangible assets; current liabilities; long-term liabilities; owners' equity. b. intangible assets; property; plant and equipment; investments; current assets; current liabilities; owners' equity; long-term liabilities. c. current assets; noncurrent assets; current liabilities; noncurrent liabilities; equity. d. noncurrent assets; current assets; equity; noncurrent liabilities; current liabilities.

D

(IFRS) 7 Both IFRS and GAAP require disclosure about a. accounting policies followed. b. judgements that management has made in the process of applying the entity's accounting policies. c. the key assumptions and estimation uncertainty. d. all of the above.

D

(IFRS) 9 The use of fair value to report assets a. is not allowed under GAAP or IFRS. b. is required by GAAP and IFRS. c. is increasing under GAAP and IFRS, but GAAP has adopted it more broadly. d. is increasing under GAAP and IFRS, but IFRS has adopted it more broadly.

D

126 A useful measure of solvency is the a. current ratio. b. earnings per share. c. return on assets ratio. d. debt to assets ratio.

D

137 Free cash flow provides an indication of a company's ability to a. generate cash to invest in new capital expenditures, but not to pay dividends. b. generate net income. c. generate cash to pay dividends, but not to invest in new capital expenditures. d. generate cash to invest in new capital expenditures and to pay dividends.

D

138 Free cash flow represents a. cash provided by operations less adjustments for capital expenditures and dividends. b. a measurement of a company's cash generating ability. c. a measure of solvency. d. All of these answer choices are correct.

D

145 If Morris Corporation has a negative $131 million free cash flow, which of the following statements is most likely true? a. Morris' capital expenditures plus cash dividends is less than its cash provided by operations. b. This free cash flow indicates that Morris will be able to repay its long-term obligations when they come due. c. This free cash flow indicates that Morris has ability to retire its stock. d. Morris' cash provided by operations is less than its cash dividends plus capital expenditures.

D

149 What organization issues U.S. accounting standards? a. Securities and Exchange Commission b. International Accounting Standards Committee c. International Auditing Standards Committee d. Financial Accounting Standards Board

D

151 All of the following are qualities of useful information except a. faithful representation. b. materiality. c. relevance. d. flexibility.

D

159 If accounting information has relevance, it is useful in making predictions about a. future IRS audits. b. new accounting principles. c. foreign currency exchange rates. d. the future events of a company.

D

160 Relevant accounting information a. is information that has been audited. b. must be reported within the operating cycle or one year, whichever is longer. c. has been objectively determined. d. is information that is capable of making a difference in a business decision.

D

168 Information presented in a clear and concise fashion so that users can comprehend its meaning is an application of a. consistency. b. timeliness. c. verifiability. d. understandability.

D

171 Different companies using the same accounting principles is an application of a. consistency. b. materiality. c. full disclosure. d. comparability.

D

179 Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption b. Economic entity assumption c. Periodicity assumption d. Going concern assumption

D

181 The going concern assumption assumes that the business a. will be liquidated in the near future. b. will be purchased by another business. c. is in a growth industry. d. will remain in operation for the foreseeable future.

D

182 The economic entity assumption states that economic events a. of different entities can be combined if all the entities are corporations. b. must be reported to the Securities and Exchange Commission. c. of a sole proprietorship cannot be distinguished from the personal economic events of its owners. d. of every entity can be separately identified and accounted for.

D

183 The concept that a business has a reasonable expectation of remaining in business for the foreseeable future is called the a. economic entity assumption. b. monetary unit assumption. c. periodicity assumption. d. going concern assumption.

D

191 Connor Corporation hired a new accountant. Over the next four years, the accountant used four different accounting methods to record depreciation for Connor's equipment. Which of the following qualities of useful information has Connor most likely violated? a. Comparability b. Relevance c. Faithful representation d. Consistency

D

192 Garrison Company prepares quarterly reports, which it distributes to all stockholders and other entities that rely on its accounting information. Which of the following is the best term for the key assumption in financial reporting that Garrison is following? a. Monetary unit assumption b. Going concern assumption c. Economic entity assumption d. Periodicity assumption.

D

56 In a classified balance sheet, assets are usually classified as a. current assets; long-term assets; property, plant, and equipment; and intangible assets. b. current assets; long-term investments; property, plant, and equipment; and common stocks. c. current assets; long-term investments; tangible assets; and intangible assets. d. current assets; long-term investments; property, plant, and equipment; and intangible assets.

D

58 A current asset is a. the last asset purchased by a business. b. an asset which is currently being used to produce a product or service. c. usually found as a separate classification in the income statement. d. expected to be converted to cash or used in the business within one year or one operating cycle, whichever is longer.

D

59 Which of the following is not classified properly as a current asset? a. Supplies b. Short-term debt investments c. A fund to be used to purchase a building within the next year d. A receivable from the sale of an asset to be collected in two years

D

63 Liabilities are generally classified on a balance sheet as a. small liabilities and large liabilities. b. present liabilities and future liabilities. c. tangible liabilities and intangible liabilities. d. current liabilities and long-term liabilities.

D

65 Which of the following is generally not classified as a current liability? a. Salaries and Wages Payable b. Accounts Payable c. Taxes Payable d. Bonds Payable

D

67 It is not true that current assets are resources that are expected to be a. realized in cash within one year. b. sold within one year. c. consumed within one year. d. acquired within one year.

D

71 Which statement about long-term investments is not true? a. They will be held for more than one year. b. They are not currently used in the operation of the business. c. They include investments in stock of other companies and land held for future use. d. They do not include long-term notes receivable.

D

73 What is the order in which assets are generally listed on a classified balance sheet? a. Current and long-term b. Current; property, plant and equipment; long-term investments; intangibles c. Current; property, plant and equipment; intangibles; long-term investments d. Current; long-term investments; property, plant and equipment, intangibles

D

94 For 2022, Fielder Inc. reported net income of $42,000, had average shares outstanding of 16,000, paid preferred dividends of $10,000 and common dividends of $5,000. What was 2022 earnings per share? a. 0.08 b. 0.5 c. 25 d. 2

D

97 Which of the following statements is true? a. Earnings per share is an internal measure and is not used by stockholders. b. The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period. c. Net income is not adjusted when computing earnings per share. d. By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance.

D

98 Earnings available to common stockholders is equal to a. total revenues b. net income + preferred dividends. c. preferred dividends - net income. d. net income - preferred dividends.

D

12 Solvency ratios measure the ability of a company to survive over a short period of time.(TRUE/FALSE)

FALSE

14 The current ratio is computed as current liabilities divided by current assets. (TRUE/FALSE)

FALSE

16 The current ratio takes into account the composition of current assets.(TRUE/FALSE)

FALSE

17 Solvency ratios measure the short-term ability of the company to pay its maturing obligations.(TRUE/FALSE)

FALSE

2 Long-term investments appear in the property, plant, and equipment section of the balance sheet.(TRUE/FALSE)

FALSE

20 Net cash provided by operating activities takes into account that a company must invest in capital expenditures just to maintain its current level of operations.(TRUE/FALSE)

FALSE

22 Free cash flow is net cash provided by operating activities less capital expenditures.(TRUE/FALSE)

FALSE

24 Free cash flow is net cash provided by operating activities less dividends.(TRUE/FALSE)

FALSE

26 The primary accounting standard-setting body in the United States is the Securities and Exchange Commission.(TRUE/FALSE)

FALSE

28 GAAP stands for generally accepted accounting procedures.(TRUE/FALSE)

FALSE

29 To be faithfully representative, accounting information should predict future events, confirm prior expectations, and be reported on a timely basis.(TRUE/FALSE)

FALSE

30 In order for information to be relevant, it must be reported on a monthly basis.(TRUE/FALSE)

FALSE

33 A major function of management is to provide the accountant with relevant and useful information.(TRUE/FALSE)

FALSE

34 The advantage of accounting information is that it provides exact and completely reliable measures.(TRUE/FALSE)

FALSE

36 The convention of consistency pertains to the use of the same accounting principles by firms in the same industry. (TRUE/FALSE)

FALSE

37 The periodicity assumption states that the business will remain in operation for the foreseeable future.(TRUE/FALSE)

FALSE

38 If a building is offered for sale at $100,000 and the buyer pays $95,000 cash for it, the buyer would record the building at $100,000.(TRUE/FALSE)

FALSE

39 The most generally accepted value used to report assets in accounting is fair value.(TRUE/FALSE)

FALSE

42 The economic entity assumption states that assets should be recorded at their cost.(TRUE/FALSE)

FALSE

44 The monetary unit assumption has led to an increase in the notes to financial statements. (TRUE/FALSE)

FALSE

48 The economic entity assumption is that a company will remain in operations for the foreseeable future.(TRUE/FALSE)

FALSE

49 Materiality is a company-specific aspect of faithful representation.(TRUE/FALSE)

FALSE

5 It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year or the normal operating cycle.(TRUE/FALSE)

FALSE

50 Relevance and cost are two constraints in accounting.(TRUE/FALSE)

FALSE

53 In general, the FASB indicates that most assets must follow the fair value principle.(TRUE/FALSE)

FALSE

55 The periodicity assumption states that every economic entity can be separately identified and accounted for.(TRUE/FALSE)

FALSE

6 The investment category on the balance sheet normally includes investments that are intended to be held for a short period of time (less than one year).(TRUE/FALSE)

FALSE

7 The main difference between intangible assets and property, plant and equipment is the length of the asset's life.(TRUE/FALSE)

FALSE

8 Profitability means having enough funds on hand to pay debts when they fall due.(TRUE/FALSE)

FALSE

(IFRS) 5 CANNOT FIT IN QUIZLET FORMAT

N/A

115-124 - CANNOT PUT IN QUIZLET FORMAT

N/A

143-144 - CANNOT PUT IN QUIZLET FORMAT

N/A

72 - CANNOT PUT IN QUIZLET FORMAT

N/A

75-85 - CANNOT PUT IN QUIZLET FORMAT

N/A

87-91 - CANNOT PUT IN QUIZLET FORMAT

N/A

99-102 - CANNOT PUT IN QUIZLET FORMAT

N/A

1 Cash and supplies are both classified as current assets.(TRUE/FALSE)

TRUE

10 Earnings per share measures the net income available on each share of common stock.(TRUE/FALSE)

TRUE

11 Liquidity ratios measure the short-term ability of a company to pay its maturing obligations and meet unexpected needs for cash. (TRUE/FALSE)

TRUE

13 Profitability ratios measure the operating success of a company for a given period of time. (TRUE/FALSE)

TRUE

15 The excess of current assets over current liabilities is called working capital.(TRUE/FALSE)

TRUE

18 The debt to assets ratio measures the percentage of assets financed by creditors.(TRUE/FALSE)

TRUE

19 Solvency is a company's ability to pay interest as it comes due and to repay the balance of a debt due at its maturity.(TRUE/FALSE)

TRUE

21 Both investors and creditors have an interest in a company's ability to generate favorable cash flows.(TRUE/FALSE)

TRUE

23 In the statement of cash flows, net cash provided by operating activities indicates the cash-generating capability of the company's operations.(TRUE/FALSE)

TRUE

25 Long-term creditors consider a high free cash flow amount an indication of solvency.(TRUE/FALSE)

TRUE

27 Generally accepted accounting principles are rules and practices that are recognized as a general guide for financial reporting purposes.(TRUE/FALSE)

TRUE

3 A liability is classified as a current liability if it is to be paid within the coming year.(TRUE/FALSE)

TRUE

31 For information to be useful, it must be both relevant and faithfully representative.(TRUE/FALSE)

TRUE

32 Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.(TRUE/FALSE)

TRUE

35 Consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period.(TRUE/FALSE)

TRUE

4 Stockholders' equity is divided into two parts: common stock and retained earnings.(TRUE/FALSE)

TRUE

40 For accounting purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business.(TRUE/FALSE)

TRUE

41 The economic entity assumption states that economic events can be identified with a particular unit of accountability.(TRUE/FALSE)

TRUE

43 The monetary unit assumption states that transactions that can be measured in terms of money should be recorded in the accounting records.(TRUE/FALSE)

TRUE

45 The going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments.(TRUE/FALSE)

TRUE

46 When preparing financial statements, the accountant assumes that the business will stay in business for the foreseeable future.(TRUE/FALSE)

TRUE

47 Full disclosure of all important facts aids in overcoming the limitations of accounting information.(TRUE/FALSE)

TRUE

51 Materiality relates to whether an item is large enough to likely influence the decision of an investor or creditor.(TRUE/FALSE)

TRUE

52 The cost constraint weighs the cost that companies incur to provide a type of information against its benefit to financial statement users.(TRUE/FALSE)

TRUE

54 A material item is one that is likely to influence an investor's decision.(TRUE/FALSE)

TRUE

9 Earnings per share is calculated by dividing net income minus preferred stock dividends for the period by the average number of common shares outstanding during the period.(TRUE/FALSE)

TRUE