Fin 461 Exam 2 – Walker QUESTIONS
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WITH ANSWERS |\
What does the balance sheet summarize for a business
|\ |\ |\ |\ |\ |\ |\ |\ |\
enterprise? - CORRECT ANSWERS ✔✔Financial position at a point |\ |\ |\ |\ |\ |\ |\ |\ |\
in time
|\
What is the balancing equation for the balancing equation for the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
balance sheet? - CORRECT ANSWERS ✔✔Assets=Liabilities +
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Stockholders' Equity |\
What is a common size balance sheet? - CORRECT ANSWERS
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✔✔A statement that expresses each account on the balance
|\ |\ |\ |\ |\ |\ |\ |\ |\
sheet as a percentage of total assets.
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Which of the following assets would be classified as current
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assets on the balance sheet? - CORRECT ANSWERS ✔✔Cash
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equivalents, inventory, prepaid expenses. |\ |\ |\
What items should be calculated when analyzing the accounts
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receivable and allowances for doubtful accounts? - CORRECT
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ANSWERS ✔✔The growth rate of sales, accounts receivable and
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the allowance for doubtful accounts, as well as the percentage of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the allowance relative to the total or gross accounts receivable.
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What type of firm generally has the highest proportion of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
inventory to total assets? - CORRECT ANSWERS ✔✔Retailers
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, What is the method of valuing inventory important? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔The inventory valuation method chosen determines
|\ |\ |\ |\ |\ |\
the value of inventory on the balance sheet and the costs of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
goods sold expense on the income statement, two items having
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
considerable impact on the financial position of the company. |\ |\ |\ |\ |\ |\ |\ |\
What are three major cost flow assumptions used by U.S.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
companies in valuing inventory? - CORRECT ANSWERS ✔✔FIFO,
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LIFO, average cost
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Assuming a period of inflation, which statement is true? -
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CORRECT ANSWERS ✔✔The FIFO method understates the cost of
|\ |\ |\ |\ |\ |\ |\ |\ |\
goods sold on the income statement.
|\ |\ |\ |\ |\
Why would a company switch to the LIFO method of inventory
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
valuation? - CORRECT ANSWERS ✔✔LIFO produces the largest
|\ |\ |\ |\ |\ |\ |\ |\
cost of goods sold expense in a period of inflation and thereby
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
lowers taxable income and taxes.
|\ |\ |\ |\
Where can one most typically find the cost flow assumptions
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
used for inventory valuation for a specific company? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔In the notes to the financial statement
|\ |\ |\ |\ |\ |\ |\
What type of firm generally has the highest proportion of fixed
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
assets to total assets? - CORRECT ANSWERS ✔✔Manufacturers.
|\ |\ |\ |\ |\ |\ |\
|\ |\ |\ |\ |\ |\ |\
WITH ANSWERS |\
What does the balance sheet summarize for a business
|\ |\ |\ |\ |\ |\ |\ |\ |\
enterprise? - CORRECT ANSWERS ✔✔Financial position at a point |\ |\ |\ |\ |\ |\ |\ |\ |\
in time
|\
What is the balancing equation for the balancing equation for the
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
balance sheet? - CORRECT ANSWERS ✔✔Assets=Liabilities +
|\ |\ |\ |\ |\ |\ |\ |\
Stockholders' Equity |\
What is a common size balance sheet? - CORRECT ANSWERS
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
✔✔A statement that expresses each account on the balance
|\ |\ |\ |\ |\ |\ |\ |\ |\
sheet as a percentage of total assets.
|\ |\ |\ |\ |\ |\
Which of the following assets would be classified as current
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
assets on the balance sheet? - CORRECT ANSWERS ✔✔Cash
|\ |\ |\ |\ |\ |\ |\ |\ |\
equivalents, inventory, prepaid expenses. |\ |\ |\
What items should be calculated when analyzing the accounts
|\ |\ |\ |\ |\ |\ |\ |\ |\
receivable and allowances for doubtful accounts? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔The growth rate of sales, accounts receivable and
|\ |\ |\ |\ |\ |\ |\ |\ |\
the allowance for doubtful accounts, as well as the percentage of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
the allowance relative to the total or gross accounts receivable.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
What type of firm generally has the highest proportion of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
inventory to total assets? - CORRECT ANSWERS ✔✔Retailers
|\ |\ |\ |\ |\ |\ |\
, What is the method of valuing inventory important? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔The inventory valuation method chosen determines
|\ |\ |\ |\ |\ |\
the value of inventory on the balance sheet and the costs of
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
goods sold expense on the income statement, two items having
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
considerable impact on the financial position of the company. |\ |\ |\ |\ |\ |\ |\ |\
What are three major cost flow assumptions used by U.S.
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
companies in valuing inventory? - CORRECT ANSWERS ✔✔FIFO,
|\ |\ |\ |\ |\ |\ |\ |\
LIFO, average cost
|\ |\
Assuming a period of inflation, which statement is true? -
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
CORRECT ANSWERS ✔✔The FIFO method understates the cost of
|\ |\ |\ |\ |\ |\ |\ |\ |\
goods sold on the income statement.
|\ |\ |\ |\ |\
Why would a company switch to the LIFO method of inventory
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
valuation? - CORRECT ANSWERS ✔✔LIFO produces the largest
|\ |\ |\ |\ |\ |\ |\ |\
cost of goods sold expense in a period of inflation and thereby
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
lowers taxable income and taxes.
|\ |\ |\ |\
Where can one most typically find the cost flow assumptions
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
used for inventory valuation for a specific company? - CORRECT
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\
ANSWERS ✔✔In the notes to the financial statement
|\ |\ |\ |\ |\ |\ |\
What type of firm generally has the highest proportion of fixed
|\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\
assets to total assets? - CORRECT ANSWERS ✔✔Manufacturers.
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