SB Chapter 3 Accounting

Barsky Corp. has the following items: Cash $5,000 Prepaid expenses 2,000 Building 40,000 Land 20,000 Inventory 15,000 Total noncurrent assets on the balance sheet is Multiple choice question. $35,000. $62,000. $75,000. $60,000.

$60,000.

Additional ________are critical to understanding financial statements and to evaluating a firm's performance. (Enter only one word.)

Blank 1: disclosures or notes

Money on hand and in banks that is available for use in the operations of the business is shown in the___________ account on the balance sheet. (Enter only one word.)

Cash

Bonds, pension obligations, and lease obligations are all examples of what? Multiple choice question. Short-term assets Long-term liabilities Short-term liabilities Long-term assets

Long-term liabilities

An analysis provided by the company's management is included in the Multiple choice question. summary of significant accounting policies. Management Discussion and Analysis. notes to the financial statements.

Management Discussion and Analysis.

Which of the following are required disclosures for related-party transactions? (Select all that apply.) Multiple select question. Nature of the relationship. Name of the related party. Intentions to continue the relationship with related parties. Amounts due to or from related parties.

Nature of the relationship. Amounts due to or from related parties.

Which of the following is true regarding disclosure notes? Multiple choice question. They explain or elaborate on data presented in the financial statements. They outline the business plan of the company. They are presented as part of Management Discussion and Analysis in the annual report. They are required for each line item on the financial statements.

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

SEC requirements provide for disclosures on executive and director compensation, particularly concerning___ options.

stock

A(n)______________ audit opinion occurs when the exceptions to the standard opinion are so great that the financial statements may be misleading.

Blank 1: adverse

Common practice requires that current assets are presented on the balance sheet in the order of________

Blank 1: liquidity

Bear Corp. has $100,000 cash in the bank restricted to repay a note payable that matures in 2 years. How should this $100,000 be reported? As cash in the current asset section of the balance sheet. As part of stockholders' equity on the balance sheet. As restricted cash in the long-term section of the balance sheet. As cash and cash equivalents on the balance sheet.

As restricted cash in the long-term section of the balance sheet.

Which of the following items is classified as cash? Multiple choice question. Bank drafts Treasury bills Accounts receivable Investment in stock of another company

Bank drafts

The role of a(n)_______ is to attest to the fairness of the financial statements they have examined. (Enter only one word.)

Blank 1: auditor, auditors, or audit

The Management Discussion and Analysis section of the financial statements includes a perspective on which of the following? (Select all that apply.) Multiple select question. Capital resources Job costing Liquidity Operations Auditors' report

Capital resources Liquidity Operations

Deferred revenues and accrued salaries payable are examples of what? Multiple choice question. Current liabilities Noncurrent liabilities Current assets Noncurrent assets

Current liabilities

The SEC requires disclosures on compensation for which of the following? (Select all that apply.) Multiple select question. Directors All employees Low-level management Executives Mid-level management

Directors Executives

Which of the following financial statements shows a firm's financial position on a particular date? Multiple choice question. statement of stockholders' equity balance sheet income statement statement of cash flows

balance sheet

Which of the following are classified as long-term liabilities? (Select all that apply.) Multiple select question. accrued salaries payable bonds payable accounts payable lease obligations of more than 1 year

bonds payable lease obligations of more than 1 year

Shareholders' equity arises primarily from amounts invested by shareholders and amounts ______. Multiple choice question. received by customers borrowed from investors borrowed from banks earned by the corporation

earned by the corporation

The readiness of a company to pay its short-term debts as they come due is referred to as ______. Multiple choice question. liquidity vertical solvency horizontal

liquidity

Which of the following items should be disclosed in other long-term assets on the balance sheet? (Select all that apply.) Multiple select question. intangible assets used in the business noncurrent investments that are not material goodwill from a business acquisition long-term prepaid expenses

noncurrent investments that are not material long-term prepaid expenses

If a company's long-term investments are not material in amount, where should they be disclosed on the balance sheet? Multiple choice question. intangible assets other assets cash and cash equivalents goodwill

other assets

If a company's long-term investments are not material in amount, where should they be disclosed on the balance sheet? Multiple choice question. other assets intangible assets goodwill cash and cash equivalents

other assets

The accounts common stock and paid-in capital in excess of par are classified as Multiple choice question. paid-in capital. other comprehensive income. treasury stock. contra equity accounts.

paid-in capital.

Which of the following are noncurrent assets? (Select all that apply.) Multiple select question. property inventory accounts receivable investments with maturity of 18 months machines

property investments with maturity of 18 months machines

Which of the following items should not be included in cash and cash equivalents in the balance sheet? restricted cash Treasury bills cashier's checks money market funds

restricted cash

Investments are reported as ________,____________ investments when the company has both the intent and ability to sell within one year (or operating cycle). (Enter one word per blank)

short term

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

The ability to pay its long-term debts as they become due is referred to as ______ of the company. Multiple choice question. working capital solvency liquidity

solvency

Which of the following are limitations of the balance sheet? (Select all that apply.) Multiple select question. The balance sheet reports the company's financial position over a period of time rather than on a particular date Assets minus liabilities is not representative of the company's true market value The balance sheet is heavily reliant on estimates rather than determinable amounts Assets minus liabilities is not representative of the company's true book value

3. The balance sheet is heavily reliant on estimates rather than determinable amounts4. Assets minus liabilities is not representative of the company's true market value

Which of the following are required disclosures for related-party transactions? (Select all that apply.) Multiple select question. Intentions to continue the relationship with related parties. Name of the related party. Amounts due to or from related parties. Nature of the relationship.

Amounts due to or from related parties. Nature of the relationship.

What is the difference between an account payable and a note payable? Multiple choice question. An account payable is usually due in 30-60 days. An account payable is a signed promissory note. A note payable is owed to a bank. A note payable is always long-term.

An account payable is usually due in 30-60 days.

Money on hand and in banks that is available for use in the operations of the business is shown in the __________account on the balance sheet. (Enter only one word.

Blank 1: cash

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as_________

Blank 1: retained Blank 2: earnings

Which of the following is a likely example of a related-party transaction? Multiple choice question. Borrowing or lending money at unusually low interest rates. Purchasing goods from suppliers. Selling goods to customers at retail values.

Borrowing or lending money at unusually low interest rates.

Which of the following are required disclosures for related-party transactions? (Select all that apply.) Multiple select question. Dollar amount of transaction. Name of the related party. Nature of the relationship. Description of transaction.

Dollar amount of transaction. Nature of the relationship. Description of transaction.

Which of the following are required SEC disclosures? (Select all that apply.) Multiple select question. Executive stock option information Executive compensation Director and executive hourly wage information Director compensation Director and executive daily activity report

Executive stock option information Executive compensation Director compensation

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

False Reason: The balance sheet measures the company's book value because many assets are not recorded at fair value.

Which of the following items should be classified as a short-term investment? Multiple choice question. Prepaid expenses. Accounts receivable. Investments to be sold in 12 months. Inventory held for sale in the normal course of business.

Investments to be sold in 12 months.

On the balance sheet, current assets are listed in the order of their what? Multiple choice question. Liquidity Solvency Equivalence

Liquidity

Which of the following are subsequent events that must be disclosed in the notes to the financial statements? (Select all that apply.) Multiple select question. Sale of a business. Collections on account. Issuance of debt securities. Event that affects a loss contingency.

Sale of a business. Issuance of debt securities. Event that affects a loss contingency.

The purpose of the balance sheet is to report Multiple choice question. a company's financial position during a period of time. the difference between revenues and expenses on a specific date. the difference between revenues and expenses during a period of time. a company's financial position on a specific date.

a company's financial position on a specific date.

Which of the following should be classified as current liabilities? (Select all that apply.) Multiple select question. accrued salaries notes payable due in 3 years accounts payable current maturities of long-term debt

accrued salaries accounts payable current maturities of long-term debt

Which of the following opinions is necessary when the auditor finds exceptions that are so material that the financial statements may be misleading? Multiple choice question. qualified adverse unqualified disclaimer

adverse

Which of the following opinions is necessary when the auditor finds exceptions that are so material that the financial statements may be misleading? Multiple choice question. unqualified disclaimer qualified adverse

adverse

A company's total assets minus its total liabilities as shown on the balance sheet is known as the_______ value. (Enter only one word.)

book

Which of the following items should be included in cash on the balance sheet? (Select all that apply.) Multiple select question. cashier's checks short-term investments money orders cash on hand

cashier's checks money orders cash on hand

Which of the following accounts represent amounts shareholders have invested in the company? (Select all that apply.) Multiple select question. common stock accumulated other comprehensive income additional paid-in capital retained earnings

common stock additional paid-in capital

Comparative financial statements refer to financial statements that are accompanied by the Multiple choice question. estimated amounts for the corresponding financial statement for the next year. corresponding financial statement of the company's largest competitor. corresponding financial statement of the preceding year.

corresponding financial statement of the preceding year.

Cash and other assets that are reasonably expected to be converted to cash or consumed within 1 year or the current operating cycle are classified as Multiple choice question. noncurrent assets. fixed assets. nonmonetary assets. current assets.

current assets.

The purpose of comparative financial statements is to allow users to (Select all that apply.) Multiple select question. detect and predict trends. compare year-to-year data analyze current year data.

detect and predict trends. compare year-to-year data

An investment should be classified as current on the balance sheet if (Select all that apply.) Multiple select question. it does not have a maturity date. it will be sold within 12 months. management has the intent and ability to liquidate it in the near term. it is an investment of stock of another company regardless of maturity

it will be sold within 12 months. management has the intent and ability to liquidate it in the near term.

Which of the following are classified as long-term liabilities? (Select all that apply.) Multiple select question. accrued salaries payable lease obligations longer than 1 year notes due in more than 1 year pension obligations

lease obligations longer than 1 year notes due in more than 1 year pension obligations

Rice Company purchases a building for $500,000, which will be used as a production facility. How should the building be classified on the balance sheet? Multiple choice question. current liability current asset noncurrent asset noncurrent liability inventory

noncurrent asset

Rice Company purchases a building for $500,000, which will be used as a production facility. How should the building be classified on the balance sheet? Multiple choice question. noncurrent asset current liability inventory current asset noncurrent liability

noncurrent asset

A _______event is a significant development that occurs after a company's fiscal year-end but before the financial statements are issued or available to be issued. (Enter only one word.)

subsequent

A significant development that occurs after a company's fiscal year-end but before the financial statements are issued is called a(n) Multiple choice question. extraordinary item. related party transaction. subsequent event. material transaction.

subsequent event.

Assets are classified as long-term if: Multiple choice question. they are expected to be converted to cash or consumed in more than one operating cycle they are expected to be converted to cash or consumed in less than one operating cycle they are tangible

they are expected to be converted to cash or consumed in more than one operating cycle

A liability is classified as current if it is due Multiple choice question. within 3 months after the fiscal year-end. within 1 year or the current operating cycle, whichever is longer. within 1 year or the current operating cycle, whichever is shorter. within 6 months of the close of the current year.

within 1 year or the current operating cycle, whichever is longer.

Which of the following items are considered cash equivalents? (Select all that apply.) Multiple select question. Commercial paper due in 1 month. U.S. Treasury bills due in 2 months. Cashier's checks and money orders. Money market funds that are quickly converted to cash.

Commercial paper due in 1 month. U.S. Treasury bills due in 2 months. Money market funds that are quickly converted to cash.

What is included in a company's paid in capital? (Select all that apply.) Multiple select question. Retained earnings Comprehensive income Common stock Additional paid-in capital

Common stock Additional paid-in capital

Which of the following are likely examples of a related-party transaction? (Select all that apply.) Purchasing goods from independent suppliers. Loaning money to officers and directors. Selling goods to affiliated companies. Borrowing or lending money at an unusually low interest rate to an affiliated company.

Loaning money to officers and directors. Selling goods to affiliated companies. Borrowing or lending money at an unusually low interest rate to an affiliated company.

What refers to the riskiness of a company with regard to the amount of liabilities in its capital structure? Multiple choice question. Long-term solvency Liquidity Cash flow risk

Long-term solvency

Which of the following items are considered cash equivalents? (Select all that apply.) Multiple select question. Money market funds quickly converted into cash. Notes receivable. Commercial paper due in less than 3 months. Cashier's checks payable on demand.

Money market funds quickly converted into cash. Commercial paper due in less than 3 months.

Which of the following items are included in the professional opinions given in the auditor's report? (Select all that apply.) Multiple select question. The accuracy of the financial statements. The effectiveness of management strategy. The effectiveness of internal control. The fairness of the financial statements.

The effectiveness of internal control. The fairness of the financial statements.

Which of the following is a subsequent event that must be disclosed in the notes to the financial statements? Multiple choice question. Investments sold after the balance sheet date. Inventory purchased after the balance sheet date. Accounts receivable collected after the balance sheet date but before the issuance of financial statements. The issuance of debt or equity securities.

The issuance of debt or equity securities.

How are current liabilities satisfied? (Select all that apply.) Multiple select question. The use of current liabilities. The use of current assets. The creation of other current liabilities. The creation of other current assets.

The use of current assets. The creation of other current liabilities.

Which of the following describe long-term liabilities? (Select all that apply.) Multiple select question. They require the creation of current liabilities for payment. They do not require the use of current assets. They do not require the creation of current liabilities for payment. They require the use of current assets.

They do not require the use of current assets. They do not require the creation of current liabilities for payment.

What is the purpose of an audit report? Multiple choice question. To provide users with a certification that the financial statements are free from error. To provide users with a professional opinion regarding the fairness of the financial statements. To provide users with assurance as to the accuracy of the financial statements.

To provide users with a professional opinion regarding the fairness of the financial statements.

What does a liability represent? Multiple choice question. Obligations owed to other entities Expenses paid in advance of use Receivables due from customers Obligations due from other entities

Obligations owed to other entities

Which type of analysis is used to determine if the company can pay its short-term debts as they come due? Multiple choice question. Currency analysis Default analysis Liquidity analysis Solvency analysis

Liquidity analysis

Which type of analysis is used to determine if the company can pay its short-term debts as they come due? Multiple choice question. Currency analysis Liquidity analysis Solvency analysis Default analysis

Liquidity analysis

A(n) ___________audit opinion occurs when there is an exception to the standard opinion but not of sufficient seriousness to invalidate the whole of the financial statements. (Enter only one word.)

qualified

Which of the following represents the net income earned by a corporation and not yet paid to shareholders? other comprehensive income retained earnings additional paid-in capital paid-in capital

retained earnings

Classifying items on the balance sheet as current and noncurrent assists financial statement users in assessing what aspects about a company? Multiple choice question. Profitability and future earnings. Potential cash flows. Solvency and liquidity. Earnings and marketability of the stock.

Solvency and liquidity.

The balance sheet provides useful information about a company's ________and long-term solvency. (Enter only one word.)

Blank 1: liquidity

A(n) ___________occurs when the auditor does not have sufficient information to express an opinion. (Enter only one word.)

Blank 1: disclaimer

Current assets include which of the following? (Select all that apply.) Multiple select question. Cash Short term investments Property and equipment Intangible assets

Cash Short term investments

Which of the following should be classified as current liabilities? (Select all that apply.) Multiple select question. accrued warranties unearned revenues income taxes payable note payable due in 2 years

accrued warranties unearned revenues income taxes payable