Chapter 5 - MCQs ACCOUNTING 301|everything you need

MULTIPLE CHOICE—Conceptual 1. Which of the following is a limitation of the statement of financial position? a. Many items that are of financial value are omitted. b. Judgments and estimates are used. c. Current fair value is not reported. d. All of these choices are correct. 2. Statement of financial position information is useful for all of the following except to a. compute rates of return b. analyze cash inflows and outflows for the period c. evaluate capital structure d. assess future cash flows 3. A limitation of the balance sheet that is not also a limitation of the income statement is a. the use of judgments and estimates b. omitted items c. the numbers are affected by the accounting methods employed d. valuation of items at historical cost 4. The statement of financial position a. Omits many items that are of financial value. b. Makes very limited use of judgments and estimates. c. Uses fair value for most assets and liabilities. d. All of the choices are correct regarding the statement of financial position. 5. The net assets of a business are equal to a. current assets minus current liabilities. b. total assets plus total liabilities. c. total assets minus total shareholders' equity. d. none of these choices are correct. 6. The basis for classifying assets as current or noncurrent is conversion to cash within a. the accounting cycle or one year, whichever is shorter. b. the operating cycle or one year, whichever is longer. c. the accounting cycle or one year, whichever is longer. d. the operating cycle or one year, whichever is sho