Chapter 3 int acct

Assets not used directly in the operations of the business are called what?

Investments

Who is responsible for the information in the annual report?

Management of the company.

The full-disclosure principle requires that financial statements report which of the following?

All material relevant information.

In a balance sheet, how are assets classified?

Current and noncurrent.

The purpose of the balance sheet is to report

a company's financial position on a specific date.

Fill in the blanks to complete the sentence. The account that represents the amount of money owed by customers is called (1) (2). (Enter one word per blank.)

1. Accounts 2. Receivable

Current (1) include cash and other items that will be converted to cash or consumed within the coming year. (Enter only one word.)

1. Assets

The financial statement that displays a firm's financial position on a particular date is the (1) (2). (Enter one word per blank)

1. Balance 2. Sheet

(1) consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale. (Enter only one word.)

1. Inventory

The full-disclosure principle requires financial statements to provide all (1) (2) information regarding the company. (Enter one word per blank.)

1. Material 2. relevant

How should liquid investments expected to be converted to cash within the current operating cycle be reported in the balance sheet?

As a short-term investment in the current asset section.

Select all that apply The SEC requires disclosures on compensation for which of the following? (Select all that apply.)

Directors Executives

Which of the following items should be classified as a short-term investment?

Investments to be sold in 12 months.

Obligations to other entities are known as what?

Liabilities

An analysis provided by the company's management is included in the

Management Discussion and Analysis.

What does a liability represent?

Obligations owed to other entities

Select all that apply The Management Discussion and Analysis section of the financial statements includes a perspective on which of the following? (Select all that apply.)

Operations Liquidity Capital resources

Accounts receivable represents which of the following?

The amount owed by customers.

What is the principle that requires that financial statements provide all material relevant information concerning the entity?

full-disclosure

Select all that apply Inventories include which of the following items? (Select all that apply.)

goods directly consumed in production finished goods goods in production

Select all that apply Which of the following items should be classified as investments on the balance sheet? (Select all that apply.)

investments in stock of another company cash restricted to purchase building note receivable due in 3 years

Which of the following is included with the annual report to help evaluate a firm's financial performance and financial health?

note disclosures

The time period necessary to convert cash to raw materials, convert raw materials into finished products, sell the products, and collect on the account receivable is referred to as the ______ cycle.

operating

Which of the following items represents an expense paid in advance that creates benefits used in the future?

prepaid expense

Which document is required to provide information on executive and director compensation?

proxy statement

Select all that apply Which of the following are common characteristics of property, plant, and equipment? (Select all that apply.)

used in normal operations long-lived tangible

Fill in the blanks to complete the sentence. A prepaid expense represents a(n) (1) recorded when an expense is paid in advance. (Enter only one word.)

1. asset

Land held for speculation, noncurrent receivables, and cash set aside for future plant expansion are all examples of (1). (Enter only one word.)

1. assets

Fill in the blanks to complete the sentence. The role of a(n) (1) is to attest to the fairness of the financial statements they have examined. (Enter only one word.)

1. auditors

Select all that apply Current assets include which of the following? (Select all that apply.)

Short term investments Cash

Classifying items on the balance sheet as current and noncurrent assists financial statement users in assessing what aspects about a company?

Solvency and liquidity.

Select all that apply Schwinn is a company that makes bicycles. Which of the following items would be included in Schwinn's inventory? (Select all that apply.)

bicycle tires bicycle chains finished bicycles

A company's assets minus its liabilities shown on the balance sheet is referred to as its ______ value.

book

Select all that apply Which of the following items are included in investments? (Select all that apply.)

cash reserved to purchase land note receivable due in 5 years

A ratio used to measure liquidity is the

current ratio.

Companies that operate in more than one significant business must provide which of the following?

segment information

Investments in stock and debt securities of other corporations are included as _____ if the company has the ability and intent to sell them within the next 12 months.

short-term investments

If a company has a large amount of long-term debt in its capital structure, this will affect the firm's ______.

solvency

Select all that apply Which of the following are characteristics of plant, property, and equipment? (Select all that apply.)

tangible used long-term in production

Assets not used directly in the operations of the business are referred to as (1). (Enter only one word.)

1. investments

Assets not used directly in the operations of the business are referred to as Blank 1 of 1. (Enter only one word.)

1. investments

Fill in the blanks to complete the sentence. Assets not used directly in the operations of the business are referred to as (1). (Enter only one word.)

1. investments

Fill in the blanks to complete the sentence. Responsibility for the financial statements and other information found in the annual report lies with (1). (Enter only one word.)

1. management

The (1) cycle refers to the period of time necessary to convert cash to raw materials, raw materials to a finished product, the finished product to receivables, and then receivables back to cash. (Enter only one word.)

1. operating

The FASB requires that companies that engage in more than one significant business must provide supplemental information concerning individual operating (1).

1. segment

SEC requirements provide for disclosures on executive and director compensation, particularly concerning (1) options. (Enter only one word.)

1. stock

True or false: Accounts receivable result from the sale of goods or services for cash.

False

True or false: Default risk refers to how adept a company is at withstanding various events that might impair its ability to earn profits.

False

True or false: The balance sheet will directly measure the company's market value.

False

What refers to the riskiness of a company with regard to the amount of liabilities in its capital structure?

Long-term solvency

Select all that apply Which of the following are examples of prepaid expenses? (Select all that apply.)

Prepaid insurance. Rent paid in advance.

Which of the following is true regarding disclosure notes?

They explain or elaborate on data presented in the financial statements.

What is the purpose of additional financial disclosures in an annual report?

To assist in understanding the financial statements.

What is the role of the auditor?

To attest to the fairness of the financial statements.

What is the role of the auditor's attest function?

To provide an opinion on the financial statements.

The financial statement that provides information about liquidity and long-term solvency is the

balance sheet

Which of the following financial statements shows a firm's financial position on a particular date?

balance sheet

A temporary investment or short-term marketable security should be reported in which section of the balance sheet?

current asset

Select all that apply Which of the following are liquidity ratios? (Select all that apply.)

current ratio quick ratio

The two classifications used for assets and liabilities on the balance sheet are ______ and ______.

current; noncurrent

Which type of risk is the risk of a company not being able to pay its obligations when they come due?

default risk

Select all that apply Property, plant, and equipment is a(n) ______ asset. (Select all that apply.)

long-lived tangible