Chapter 4 Study set

Which "FASB Statement of Financial Accounting Concepts" defines investments by owners and distributions to owners?

"Concepts No. 6"

To be considered an asset, an economic resource must have three characteristics:

(1) future economic benefit, (2) under the control of the business entity, and (3) acquisition must have occurred.

ABC Company's inventory turnover ratio is 9.2. What is ABC Company's inventory turnover in days? (Round answer to the nearest whole day.)

40 days

If ABC Company's inventory turnover days are 59, accounts receivable turnover days are 34, and accounts payable turnover days are 23, what is ABC Company's operating cycle in days?

70 days

Which of the following statements regarding IFRS and U.S. GAAP is not true?

A company is required to disclose the par value, as well as the number of shares authorized, issued and fully paid, and issued but not fully paid under U.S. GAAP.

The accounting equation represents the financial position of the company. One of the purposes of the balance sheet is to show that the accounting equation is in balance. Which of the following is the accounting equation?

Assets = Liabilities + Shareholders' Equity

Under international accounting standards, liabilities and owners' equity on the balance sheet usually appear in which order?

Capital and reserves, noncurrent liabilities, and current liabilities

Assume an asset is measured by the amount of cash (or its equivalent) into which it is expected to be converted in an orderly transaction between market participants on the date of measurement. Which of the following measurement alternatives is in use in this case?

Fair value

Which of the following would a user of financial statements expect to be able to find in the statement of changes in shareholders' equity?

Increases from comprehensive income

__________ by owners typically involve owners contributing assets (commonly cash) in exchange for a share of ownership in the company.

Investments

Which of the following statements regarding contingencies according to U.S. GAAP is not true?

Loss contingencies must be recognized if they are possible and can be reasonably estimated.

Which of the following statements is not true?

Lower leverage typically is a key indicator of greater financial risk.

Which of the following statements regarding par value is true?

Par value does not suggest current fair value.

Which of the following statements regarding financial statements is not true?

The statement of cash flows explains changes in the financial position in terms of accrual-based accounting.

The purpose of the balance sheet is to report the resources of a company (assets) and the claims on the company (liabilities and equity) __________, usually the last day of the fiscal year.

as of a specific date

All of the following financial statements report the changes in the financial position of the company during the period except the

balance sheet.

Total shareholders' equity falls into all of the following categories except

controlling interests.

All of the following are operating capability ratios except the

current ratio.

Financial statement analysis techniques can do all of the following except

disclose the future success of a company.

All of the following are acceptable ways to measure elements of a balance sheet except

future value.

The amount paid to initially acquire an asset is

historical cost

The steps a company must complete in preparing the balance sheet do not include

identifying the changes in the revenues.

Probable future sacrifices of economic benefits arising from present obligations of a company to transfer assets or provide services in the future to other entities as a result of past transactions or events are

liabilities

IFRS require that companies classify assets on the balance sheet as either

noncurrent or current.

Changes in the separate shareholders' equity accounts can be disclosed in all of the following ways except a

parenthetical remark.

The measurement of an asset's value that considers the discounted future cash inflows (and outflows) relating to the asset is called the

present value.

Activities between affiliated entities such as subsidiaries must be disclosed in the financial statements of a corporation as

related party transactions.

A reader might find information about gain contingencies in an annual report by examining

the footnote disclosures.

All of the following are examples of subsequent events that would be disclosed in the footnotes to the financial statements except

the inability to collect a major customer's accounts receivable.

Current assets are cash or other assets that are reasonably expected to be converted into cash, sold, or consumed within 1 year or a normal operating cycle. An operating cycle is defined as the company's ability to spend cash

to acquire inventory, which is sold and returned to cash.

A common-size analysis usually presents assets, liabilities, and equity amounts in terms of percentages of

total assets.