FINC 3131- Chapter 2 HW

The matching principle states that: - costs should be recorded on the income statement whenever those costs can be reliably determined. - sales should be recorded when the payment for that sale is received. - costs should be recorded when paid. - sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined. - the costs of producing an item should be recorded when the sale of that item is recorded as revenue

the costs of producing an item should be recorded when the sale of that item is recorded as revenue

the least liquid current asset is typically considered to be

inventory; because it may be subject to obsolescence, and will likely incur the greatest loss in value if it must be sold quickly

LEAST likely to have a book value near its market value?

Fixed Assets-for many companies, intangible fixed assets such as good management, a good reputation, talented employees, and the company brand name, are not even shown on the balance sheet

Accounting principles dictate that assets should be placed on the balance sheet at:

Historical Cost-Assets are placed on balance sheet at the amount paid for them when they are purchased. Referred to as the asset's historical cost, book value, or carrying value

Liquidity refers to the

Speed and ease with which an asset can be converted to cash at or near market value

The financial statement that summarizes a firm's accounting value as of a particular date is called the: - cash flow statement. - liquidity position. - balance sheet. - income statement. - periodic operating statement.

balance sheet

Which one of the following will decrease the liquidity level of a firm? - Cash sale of inventory - Collection of an account receivable - Proceeds from a long-term loan - Credit sale of inventory - Cash purchase of inventory

cash purchase of inventory

current assets are those that are expected to

convert to cash over the next 12 months

net working capital is

current assets - current liabilities

Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital: - had to increase. - could have remained constant if the amount of the decrease in current assets equaled the amount of the increase in current liabilities. - was unaffected as the changes occurred in the firm's current accounts. - could have either increased, decreased, or remained constant. - had to decrease.

had to decrease

The accounting statement that measures the revenues, expenses, and net income of a firm over a period of time is called the: - net working capital schedule. - GAAP statement. - balance sheet. - income statement. - statement of cash flows.

income statement