Exam (elaborations) ACC 255(ACC255) (ACC255) Horngren's Financial and Managerial Accounting, 6th Edition (Miller-Nobles) Chapter 4 Completing the Accounting Cycle

Horngren's Financial and Managerial Accounting, 6e (Miller-Nobles)
Chapter 4 Completing the Accounting Cycle

4.1 Learning Objective 4-1

1) The balance sheet is the first financial statement that is prepared at the end of the
period.
Answer: FALSE

2) The statement of retained earnings shows how retained earnings changed during the
period due to acquiring assets and paying liabilities.
Answer: FALSE

3) In a balance sheet, prepared under IFRS guidelines, cash is often shown as one of the
last assets listed.
Answer: TRUE

4) Assets and liabilities are presented in a different order on a balance sheet prepared
following IFRS than on a balance sheet prepared following U.S. GAAP.
Answer: TRUE

5) Revenue may be called Profit and Net Income may be called Turnover in an income
statement prepared under IFRS.
Answer: FALSE

6) Which of the following is NOT a balance sheet account?
A) Unearned Revenue
B) Prepaid Rent
C) Accumulated Depreciation - Building
D) Dividends
Answer: D

7) Which financial statement is prepared last?
A) income statement
B) balance sheet
C) statement of retained earnings
D) The financial statements can be prepared in any order.
Answer: B

8) The financial statement that reports assets, liabilities, and stockholders' equity as of the
last day of the period is called the ________.
A) income statement
B) statement of retained earnings
C) balance sheet
D) unadjusted trial balance
Answer: C

9) List the order in which the balance sheet, statement of retained earnings, and income
statement are prepared. Briefly discuss why this order is necessary.
Answer: The order in which these statements are prepared is income statement, statement
of retained earnings, and balance sheet. The income statement is prepared first because
net income is needed for the statement of retained earnings. The balance sheet is
prepared last because this statement needs the ending balance of retained earnings.

10) In a balance sheet, assets are classified as either current or long term, depending on

,their liquidity.
Answer: TRUE

11) Prepaid Rent is always classified as a long-term asset.
Answer: FALSE

12) The operating cycle is the time span required for a business to repay its long-term
liabilities.
Answer: FALSE

13) A balance sheet prepared in the account form lists the assets at the top and the
liabilities and stockholders' equity below.
Answer: FALSE

14) A balance sheet prepared in the report form lists the assets on the left and the
liabilities and stockholders' equity on the right.
Answer: FALSE

15) A classified balance sheet can be presented in either a report or an account form.
Although either is acceptable, the report form is more popular.
Answer: TRUE

16) A net loss from the balance sheet decreases Retained Earnings.
Answer: FALSE


17) Liquidity is a measure of how quickly an item can be converted to net income.
Answer: FALSE
18) In a classified balance sheet, assets are reported in the order of liquidity and liabilities
are listed in the order in which they must be paid.
Answer: TRUE

19) Intangible assets are long-term assets that have no physical form and convey special
rights.
Answer: TRUE

20) The financial statements are prepared from the ________.
A) adjusted trial balance
B) chart of accounts
C) statement of retained earnings
D) unadjusted trial balance
Answer: A

,21) Assets that are expected to be converted to cash, sold, or used up during the next 12
months, or within the business's normal operating cycle if the cycle is longer than a year,
are called ________ assets.
A) intangible
B) plant
C) long-term
D) current
Answer: D

22) The time span during which cash is paid for goods and services, which are then sold to
customers from whom the business collects cash, is called the ________.
A) production time
B) operating cycle
C) accounting cycle
D) sales time
Answer: B

23) All assets that will not be converted to cash or used up within the business's operating
cycle or one year, whichever is greater, are called ________.
A) long-term assets
B) fully depreciated assets
C) current assets
D) current liabilities
Answer: A

24) Property, plant, and equipment are ________.
A) presented in order of the category name, with Land being presented last
B) also called fixed or plant assets
C) either tangible or intangible assets
D) easily converted to cash
Answer: B

25) Patents, copyrights, and trademarks are examples of ________.
A) short-term investments
B) fixed assets
C) long-term investments
D) intangible assets
Answer: D
26) Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ________.
A) short-term investments
B) fixed assets
C) current liabilities
D) long-term liabilities
Answer: C

27) Which of the following is a measure of how quickly an item can be converted to cash?
A) Debt ratio
B) Return on assets ratio
C) Liquidity
D) Accounting cycle
Answer: C

28) Which of the following is the most liquid asset?
A) Building
B) Prepaid Expenses
C) Accounts Receivable

, D) Cash
Answer: D

29) Which of the following is a current asset that is expected to be converted to cash, sold,
or consumed during the next year (or the normal operating cycle, if longer)?
A) Land
B) Equipment
C) Building
D) Accounts Receivable
Answer: D
30) Under which of the following categories would bonds held as an investment for more
than a year appear?
A) current assets
B) long-term liabilities
C) long-term assets
D) current liabilities
Answer: C

31) Under which of the following categories would Accounts Receivable appear?
A) current assets
B) current liabilities
C) long-term assets
D) long-term liabilities
Answer: A

32) Under which of the following categories would bonds held as an investment for less
than a year appear?
A) long-term assets
B) current assets
C) long-term liabilities
D) current liabilities
Answer: B

33) Under which of the following categories would Accounts Payable appear?
A) long-term assets
B) current assets
C) long-term liabilities
D) current liabilities
Answer: D