Accounting SmartBook 4-3

What defines a long-term investment? (Check all that apply.) Long-term investments are sometimes referred to as noncurrent investments. Long-term investments are used to produce or sell products and services. Notes receivable and stock and bond investments are assets that are expected to be held for more than one year. Long-term investments are long-term resources that usually lack physical form.

---Long-term investments are sometimes referred to as noncurrent investments. ---Long-term investments are investments in stocks and bonds when they are expected to be held for more than one year or the operating cycle. ---Notes receivable and stock and bond investments are assets that are expected to be held for more than one year.

Select the statement below that describes how to indicate an account has an abnormal balance. Double underline the abnormal balance. Circle the abnormal balance. Use green ink to print the abnormal balance.

Circle the abnormal balance.

The following categories are on a classified balance sheet. List them in the order that they would appear.

Current Asset Long-term investment Plant asset Intangible asset Current Liabilities Long term liabilities

Choose the formula below that is used to calculate the current ratio of a business. Current assets divided by current liabilities Current assets divided by plant assets Current liabilities divided by current assets Current liabilities divided by long-term liabilities

Current assets divided by current liabilities

Which of the accounts below would appear in the equity section of a classified balance sheet? Income Summary Service Revenue Owner, Capital

Owner, Capital

Identify which of the accounts below would be classified as a current asset. (Check all that apply.) Prepaid rent Accounts receivable Office supplies Land Equipment Cash

Prepaid rent office supplies cash accounts receivable

Determine which of the statements below are correct regarding the current ratio. (Check all that apply.) The current ratio can affect interest rates charged by creditors when lending money to a business. 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 useful in aging past due accounts of customers. The current ratio helps a supplier determine whether it wants to extend credit to a customer. A current ratio of less than 1.0 would indicate that a business's debt can be easily paid off with current assets. The current ratio is one measure of a company's ability to pay its short-term debts.

The current ratio helps a supplier determine whether it wants to extend credit to a customer. 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 can affect interest rates charged by creditors when lending money to a business. The current ratio is one measure of a company's ability to pay its short-term debts.

Identify the accounts below that would be classified as intangible assets on a classified balance sheet. (Check all that apply.) Prepaid rent Copyrights Accounts receivable Franchise Goodwill Patent Investments (in stocks of other companies) Land (held for future expansion) Trademark

Trademark Franchise Goodwill Copyrights Patent

Identify which of the accounts below would be classified as a plant asset account. (Check all that apply.) Notes receivable due in two years Land currently being used Building Machinery Cash Equipment Supplies Patent

building equipment machinery land currently being used

Current assets are: equipment and other assets that have a life greater than one year difficult to convert to cash or other monetary assets cash and other resources that are expected to be sold, collected or used within one year property, plant and equipment that are tangible and depreciated

cash and other resources that are expected to be sold, collected or used within one year

Accounting for salaries expense without using a reversing entry requires the following on the date of payment: compound entry that debits the expense and liability accounts and credits cash entry that credits the expense and debits the cash account for the same amounts entry that debits the expense and credits the cash account for the same amounts compound entry that credits the expense and liability accounts and debits cash

compound entry that debits the expense and liability accounts and credits cash

Accounting ________ (with/without) reversing entries for accrued salaries will require a debit to salaries expense, a debit to a salaries payable and a credit to cash for the first payment of salaries in the next period.

without

Define "current" as it applies to assets and liabilities on a classified balance sheet. Current items are those that are not easily converted to cash. Current items are those that have a fair market value greater than their original cost. Current items are those expected to come due within one year or the company's operating cycle, whichever is longer. Current items are those expected to come due within one month of the company's operating cycle.

Current items are those expected to come due within one year or the company's operating cycle, whichever is longer.

On December 31, AB Consulting recorded two days' wages of $100 in an adjusting entry which included a debit to Wages Expense and a credit to Wages Payable. On January 1, the accountant prepared a reversing entry which included which of the following? Debit Wages Expense $100; Credit Wages Payable $100. Debit Wages Payable $100; credit Cash $100. Debit Wages Expense $100; credit Cash $100. Debit Wages Payable $100; credit Wages expense $100.

Debit Wages Payable $100; credit Wages expense $100.

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 _________ (Capital/Revenue/Cash) account.

Owner's; equity; Capital

Which of the statements below is (are) correct regarding the accounting cycle? (Check all that apply.) The accounting cycle contains 10 steps. The accounting cycle refers to the steps that occur within a company to approve expenses for payment. The accounting cycle is a series of steps repeated each reporting period. The cycle contains steps for adjusting and closing accounts. The accounting cycle refers to steps followed by a company to prepare its financial statements. The accounting cycle takes place anytime the general ledger accounts need adjusting.

The accounting cycle contains 10 steps. The accounting cycle is a series of steps repeated each reporting period. The cycle contains steps for adjusting and closing accounts. The accounting cycle refers to steps followed by a company to prepare its financial statements.

Current items can be described as those expected to come due within one ______ (month/year) and are listed in the order of how ________ (quickly/slowly) they could be converted to or paid in cash.

year; quickly

What are current liabilities? (Check all that apply.) Current liabilities are liabilities due to be paid within one year. Current liabilities are liabilities that are not due to be settled within one year or the operating cycle, whichever is longer. Current liabilities are usually settled by paying out current assets such as cash. Current liabilities are reported in the order of those to be settled first. Current liabilities are property, plant and equipment that are tangible and depreciated.

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

Review the statements below and select the one which is correct regarding the effect that reversing entries have on financial statements. Expenses and liabilities will be higher when reversing entries are used. Assets and revenues will be lower when reversing entries are used. Financial statements are unaffected by the choice to use or not use reversing entries. Net income will be higher, but total assets will be lower.

Financial statements are unaffected by the choice to use or not use reversing entries.

What is an intangible asset? (Check all that apply.) Intangible assets are long-term resources that benefit business operations, but lack physical form. Intangible assets are used to produce or sell products and services and are usually depreciated. Intangible assets can easily be converted to cash. The value of intangible assets comes from the privileges or rights granted to or held by the owner.

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.

A reversing entry can be described as a(n): (Check all that apply.) entry that is the exact opposite of an accrual adjusting entry. entry that is recorded in response to an adjusting entry made in the previous reporting period. required entry done at the end of an accounting period. entry whose purpose is to simplify a company's record keeping. optional entry. entry that reduces expenses reported on the income statement.

entry that is the exact opposite of an accrual adjusting entry. entry that is recorded in response to an adjusting entry made in the previous reporting period. entry whose purpose is to simplify a company's record keeping. optional entry.

A classified balance sheet can be described as a balance sheet that: (Check all that apply.) lists all assets according to the size of their balance with larger dollar amounts listed first. lists current assets in the order of how quickly they can be converted to cash. is more useful to decision makers. contains subgroups for expenses and revenues. organizes assets and liabilities into important subgroups.

lists current assets in the order of how quickly they can be converted to cash. is more useful to decision makers. organizes assets and liabilities into important subgroups.

A classified balance sheet has several categories for assets and liabilities including: (Check all that apply.) Long-term investments. Noncurrent (long-term) liabilities. Current assets. Noncurrent equity. Tangible current assets. Plant assets. Operating expenses.

long-term investments current assets noncurrent (long term) liabilities plant assets

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 Notes receivable due in 3 months Accounts receivable Cash Franchise Equipment Investments in stocks

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

Identify the accounts below that would be classified as current liabilities on a classified balance sheet. (Check all that apply.) Accounts receivable Accounts payable Notes payable (due in three months) Mortgage payable Taxes payable Notes payable (due in three years) Unearned rent

Taxes payable Unearned rent Accounts payable

Which of the statements below explains the accounting cycle? The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements. The accounting cycle is another name for the adjustment process at the end of the period. The accounting cycle refers to the work sheet used during the period to record adjustments and the post-closing trial balance. The accounting cycle is another name for the closing process at the end of the year.

The accounting cycle is repeated each reporting period and refers to the steps taken in preparing financial statements.

Some of the steps in the accounting cycle are listed below. Place them in the correct order of use.

Journalize transactions into the journal Journalize and post the adjustments prepare the adjusted trial balance prepare the financial statements journalize and post closing entries prepare post-closing trial balance

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. Long-term liabilities are liabilities due to be paid within one year. Long-term liabilities are reported before current liabilities on a classified balance sheet. Long-term liabilities are costs incurred within an accounting period that have uncertain benefits.

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

Identify which of the following steps in the accounting cycle is optional. Closing journal entries Reversing journal entries Adjusting journal entries Adjusted trial balance

Reversing journal entries

Which of the following lists steps of the accounting cycle in the correct order (note that not all steps are listed)? Financial statements, Adjusted trial balance, Closing journal entries. Closing journal entries, Adjusted trial balance, Financial statements. Adjusted trial balance, Post-closing trial balance, Adjusting journal entries. Trial balance, Adjusting journal entries, Post-closing trial balance.

Trial balance, Adjusting journal entries, Post-closing trial balance.

Identify the accounts below that would be classified as long-term liabilities on a classified balance sheet. (Check all that apply.) Unearned rent Notes receivable (due in three years) Mortgage payable Bonds payable (due in five years) Accounts payable Notes payable (due in five months)

Mortgage payable Notes payable Bonds payable (due in five years)

Review the statements below and select the items that are correct regarding the operating cycle for a business. (Check all that apply.) Most operating cycles are less than one year. The length of a company's operating cycle depends on its activities. 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-month period or operating cycle in deciding which assets and liabilities are current. Most companies use a one-year period or operating cycle in deciding which assets and liabilities are current. Most operating cycles are greater than one year.

Most operating cycles are less than one year. The length of a company's operating cycle depends on its activities. 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.

Define plant assets by selecting the correct statements below. (Check all that apply.) Plant assets are cash and other resources that are expected to be sold, collected or used within one year. Plant assets are property, plant and equipment that are tangible. Plant assets are expected to be held for less than one year. Plant assets are equipment and other assets that have a life greater than one year. Plant assets are used to produce or sell products or services.

Plant assets are property, plant and equipment that are tangible. Plant assets are equipment and other assets that have a life greater than one year. Plant assets are used to produce or sell products or services.