ACC 250..FINANCIAL ACCOUNTING...QUESTIONS AND ANSWERS..100%

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 34) Which of the following is a plant asset? A) Equipment B) Patents C) Trademark D) Accounts Receivable Answer: A 35) Notes Payable due within two years are classified as . A) current liabilities B) current assets C) long-term liabilities D) long-term assets Answer: C 36) Assets with no physical form are . A) current assets B) intangible assets C) not listed on the balance sheet because they have no value D) included in stockholders' equity Answer: B 37) Which of the following is an example of an intangible asset? A) Equipment B) Plant C) Property D) Copyright Answer: D 38) Which of the following statements regarding intangible assets is incorrect? A) Intangible assets have no physical form. B) Intangible assets are valuable because of the special rights they carry. C) Intangible assets are not reported on the balance sheet. D) Intangible assets include the exclusive right to produce or sell an invention. Answer: C 39) A balance sheet that lists the assets above the liabilities and stockholders' equity sections is a(n) balance sheet. A) report form B) unclassified form C) account form D) audited form Answer: A 40) Buildings, land, and equipment are classified as . A) current assets B) long-term assets C) current liabilities D) long-term liabilities Answer: B 41) Which of the following would be considered a long-term asset? A) Accounts Payable B) Land C) Office Supplies D) Retained Earnings Answer: B 42) The balances of select accounts of Sandra, Inc. as of December 31, 2018 are given below: Debit Credit Building $130,000 Cash 5,000 Office Supplies 800 Furniture 5,000 Prepaid Insurance 450 Accumulated Depreciation—Furniture $1,000 Land 32,000 Accumulated Depreciation—Building 4,600 Accounts Receivable 2,300 The insurance has been prepaid until June 30, 2019. Determine the amount of total current assets reported on the balance sheet at December 31, 2018. A) $12,300 B) $5,800 C) $8,550 D) $6,250 Answer: C 43) The balances of select accounts of Donovan, Inc. as of December 31, 2018 are given below. Debit Credit Building $120,000 Cash 9,000 Office Supplies 1,000 Furniture 4,000 Prepaid Insurance 600 Accumulated Depreciation—Furniture $2,000 Land 33,000 Accumulated Depreciation—Building 4,000 Accounts Receivable 2,000 What amount of total long-term assets would be shown on the balance sheet at December 31, 2018? A) $120,000 B) $151,000 C) $153,000 D) $157,000 Answer: B 44) The balances of select accounts of Elliott, Inc. as of December 31, 2018 are given below: Notes Payable—short-term $1,200 Salaries Payable 6,000 Notes Payable—long-term 20,000 Accounts Payable 3,000 Unearned Revenue 1,000 Interest Payable 2,500 The Unearned Revenue is the amount of cash received for services to be rendered in January, 2019. The Interest Payable is due on February 15, 2019. What are the total current liabilities shown on the balance sheet at December 31, 2018? A) $5,500 B) $11,200 C) $13,700 D) $12,500 Answer: C 45) The balances of select accounts of McMurray, Inc. as of December 31, 2018 are given below: Notes Payable—short-term $1,300 Salaries Payable 3,000 Notes Payable—long-term 24,000 Accounts Payable 3,300 Unearned Revenue 1,000 Interest Payable 2,400 The Unearned Revenue is the amount of cash received for services to be rendered in January 2019. Interest Payable will be paid on February 5, 2019. What are the total long- term liabilities shown on the balance sheet at December 31, 2018? A) $1,300 B) $3,000 C) $4,300 D) $24,000 Answer: D 46) Liquidity is a measure of how . A) quickly an asset may be converted into cash B) long an asset can be used C) easily an asset can be exchanged for another asset D) quickly an asset appreciates in value Answer: A 47) Regarding a classified balance sheet, which of the following statements is correct? A) Accounts are classified by their purchase dates. B) Account balances are listed from the highest amount to the lowest amount. C) Assets are listed in the order of their liquidity. D) Assets are listed in alphabetical order. Answer: C 48) Regardin