ACC1210 chapter 3 part 2

Using the financial information of ABC Co. below, evaluate the company's current ratio. Select all answers which apply. $ in millions 2019 Current assets $ 620 Current liabilities $ 430 Current ratio 1.44 Industry current ratio 1.28

The company's ability to pay short-term obligations is not in doubt since its current ratio is greater than 1.0 The company's ratio is above the industry's ratio, so this company is able to cover its debt better than others in this industry.

Using the financial information of ABC Co. below, compute its current ratio for the period. $ in millions 2019 Current assets $ 520 Current liabilities $ 128 Long-term liabilities $ 250

4.06

Determine which of the statements below are correct regarding the current ratio. (Check all that apply.)

A current ratio of less than 1.0 would indicate that a company would have a problem paying off short term debt. The current ratio is one measure of a company's ability to pay its short-term debts. The current ratio can affect interest rates charged by creditors when lending money to a business. The current ratio helps a supplier determine whether it wants to extend credit to a customer.

Define equity by completing the following statement. Equity is the _____________(creditor's/litigator's/owner's) claim on the assets of a business. In a proprietorship, this claim is reported in the _______________(asset/equity/liability) section of a balance sheet in the _______________(Retained earnings/Revenue/Cash) account.

Blank 1: owner's Blank 2: equity Blank 3: Retained earnings

A post-closing trial balance is a list of___________ (permanent/temporary) accounts and their balances from the___________(journal/ledger)____________(after/before) all _________________(adjusting/closing) entries have been journalized and posted.

Blank 1: permanent Blank 2: ledger Blank 3: after Blank 4: closing

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.)

Bonds payable (due in five years) Mortgage payable

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.)

Accounts payable Taxes payable Notes payable (due in three months) Unearned rent

The formula to figure out the profit margin of a company is _______________(Net income/Accounts receivable/Net sales) divided by _______________(Net income/Cash/Net sales).

Blank 1: net income Blank 2: net sales

What is an intangible asset? (Check all that apply.)

Intangible assets are long-term resources that benefit business operations, but lack physical form. The value of intangible assets comes from the privileges or rights granted to or held by the owner.

Demonstrate your knowledge of preparing a post-closing trial balance by selecting the accounts below that would be included on it. (Check all that apply.)

Liability accounts Asset accounts Permanent accounts

Which of the following defines long-term liabilities?

Long-term liabilities are debts of a business that are not due to be settled within one year.

Given the following information for Mouse Inc., calculate its profit margin for the year 2018. $ in thousands 2018 2019 Net income $ 500 $ 450 Net sales 3500 3650 Accounts receivable 2150 1500

14.29%

The entries to close the revenue and expense accounts for Jefferson Company are shown below. The next closing entry in the closing process would include: (Check all that apply.) Account Debit Credit Service Fees 20,000 Income Summary 20,000 (Close revenue accounts.) Income Summary 22,900 Rent Expense 22,900 (Close expense accounts.)

A debit to the Retained Earnings account for $2,900. A credit to Income Summary for $2,900.

Identify which of the accounts below would be classified as a plant asset account. (Check all that apply.)

Building Land currently being used Machinery Equipment

Identify which of the accounts below would be classified as a current asset. (Check all that apply.)

Cash Office supplies Accounts receivable Prepaid rent

A company had the following selected balances: Account Debit Credit Service Revenue $9,000 Rental Revenue $2,000 Wages Expense $5,000 Utilities Expense $10,000 Dividends $750

Credit Income Summary $4,000; and debit Retained Earnings $4,000.

Choose the formula below that is used to calculate the current ratio of a business.

Current assets divided by current liabilities

Identify the accounts below that would be classified as intangible assets on a classified balance sheet. (Check all that apply.)

Patent Goodwill Franchise Copyrights Trademark

Define plant assets by selecting the correct statements below. (Check all that apply.)

Plant assets are equipment and other assets that have a life greater than one year. Plant assets are difficult to convert to cash quickly. Plant assets are property, plant and equipment that are tangible.

Which of the following statements correctly define(s) a profit margin? (Check all that apply.)

Profit margin is the ratio of a business's net income to its net sales. Profit margin is a useful measure of a business's operating results. Profit margin is also called return on sales.

Which of the accounts below would appear in the equity section of a classified balance sheet?

Retained Earnings

In preparing a post-closing trial balance, which of the following statements are correct? (Check all that apply.)

The retained earnings account on the post-closing trial balance will include the net income or net loss for the period. All permanent accounts with a balance in the general ledger will be included. The total of all debit balances will equal the total of all credit balances.

What are current liabilities? (Check all that apply.)

Current liabilities are reported in the order of those to be settled first. Current liabilities are obligations due to be paid within one year. Current liabilities are usually settled by paying out current assets such as cash.

What defines a long-term investment? (Check all that apply.)

Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. Long-term investments are sometimes referred to as noncurrent investments.

Identify the accounts below that would be classified as a long-term investment. (Check all that apply.)

Notes receivable due in 2 years Investments in bonds Land held for future expansion

Review the statements below and select the items that are correct regarding the operating cycle for a business. (Check all that apply.)

The operating cycle is the time span from when cash is used to acquire goods and services until cash is received from the sale of goods or services Most companies use a one-year period or operating cycle, in deciding which assets and liabilities are current. Most operating cycles are less than one year. The length of a company's operating cycle depends on its activates