Chapter 4.2

A current asset is a) usually found as a separate classification in the income statement. b) an asset that a company expects to convert to cash or use up within one year. c) the last asset purchased by a business. d) an asset which is currently being used to produce a product or service.

b

All of the following are property, plant, and equipment except a) machinery. b) supplies. c) buildings. d) land.

b

Equipment is classified in the balance sheet as a) a current asset. b) property, plant, and equipment. c) a long-term investment. d) an intangible asset.

b

On a classified balance sheet, current assets are customarily listed a) in alphabetical order. b) in the order of liquidity. c) in the order of acquisition. d) with the largest dollar amounts first.

b

An intangible asset a) is worthless because it has no physical substance. b) is converted into a tangible asset during the operating cycle. c) does not have physical substance, yet often is very valuable. d) cannot be classified on the balance sheet because it lacks physical substance.

c

The most important information needed to determine if companies can pay their current obligations is the a) projected net income for next year. b) relationship between short-term and long-term liabilities. c) relationship between current assets and current liabilities. d) net income for this year.

c

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

d

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

d

Current liabilities a) are obligations that the company is to pay within the forthcoming year. b) are listed in the balance sheet in order of their expected maturity. c) should not include long-term debt that is expected to be paid within the next year. d) are listed in the balance sheet, starting with accounts payable.

a

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

c