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ACC 303 Week 11 Final Exam




Question;TRUE;FALSE?Conceptual;1. Liquidity refers to the ability of;an enterprise to pay its debts as they mature.;2. The balance sheet omits many items;that are of financial value to the business but cannot be recorded objectively.;3. Financial flexibility measures the;ability of an enterprise to take effective actions to alter the amounts and;timing of cash flows.;4. Companies frequently describe the;terms of all long-term liability agreements in notes to the financial statements.;5. An asset which is expected to be;converted into cash, sold, or consumed within one year of the balance sheet;date is always reported as a current asset.;6. Land held for speculation is;reported in the property, plant, and equipment section of the balance sheet.;7. The account form and the report form;of the balance sheet are both acceptable under GAAP.;8. Because of the historical cost;principle, fair values may not be disclosed in the balance sheet.;9. Companies have the option of;disclosing information about the nature of their operations and the use of;estimates in preparing financial statements.;10. Companies may use parenthetical;explanations, notes, cross references, and supporting schedules to disclose;pertinent information.;11. The accounting profession has;recommended that companies use the word reserve only to describe amounts;deducted from assets.;12. On the balance sheet, an adjunct;account reduces either an asset, a liability, or an owners? equity account.;13. The primary purpose of a statement;of cash flows is to report the cash effects of operations during a period.;14. The statement of cash flows reports;only the cash effects of operations during a period and financing transactions.;15. Financial flexibility is a;company?s ability to respond and adapt to financial adversity and unexpected;needs and opportunities.;16. Collection of a loan is reported as;an investing activity in the statement of cash flows.;17. Companies determine cash provided;by operating activities by converting net income on an accrual basis to a cash;basis.;18. Significant financing and investing;activities that do not affect cash are not reported in the statement of cash;flows or any other place.;19. Financial statement readers often;assess liquidity by using the current cash debt coverage ratio.;20. Free cash flow is net income less;capital expenditures and dividends.;MULTIPLE;CHOICE?Conceptual;21. Which of;the following is a limitation of the balance sheet?;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;22. The balance sheet;is useful for analyzing all of the following except;a. liquidity.;b. solvency.;c. profitability.;d. financial flexibility.;23. Balance sheet;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;24. Balance sheet;information is useful for all of the following except;a. assessing a company's risk;b. evaluating a company's liquidity;c. evaluating a company's;financial flexibility;d. determining free cash flows.;25. 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;26. The balance sheet;contributes to financial reporting by providing a basis for all of the;following except;a. computing rates of return.;b. evaluating the capital;structure of the enterprise.;c. determining the increase in;cash due to operations.;d. assessing the liquidity and;financial flexibility of the enterprise.;27. One;criticism not normally aimed at a balance sheet prepared using current;accounting and reporting standards is;a. failure to reflect current;value information.;b. the extensive use of separate;classifications.;c. an extensive use of estimates.;d. failure to include items of;financial value that cannot be recorded objectively.;28. The amount;of time that is expected to elapse until an asset is realized or otherwise;converted into cash is referred to as;a. solvency.;b. financial flexibility.;c. liquidity.;d. exchangeability.;29. 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;stockholders' equity.;d. none of these.;30. The correct order;to present current assets is;a. cash, accounts receivable;prepaid items, inventories.;b. cash, accounts receivable;inventories, prepaid items.;c. cash, inventories, accounts;receivable, prepaid items.;d. cash, inventories, prepaid;items, accounts receivable.;31. 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 shorter.;32. The basis;for classifying assets as current or noncurrent is the period of time normally;required by the accounting entity to convert cash invested in;a. inventory back into cash, or;12 months, whichever is shorter.;b. receivables back into cash, or;12 months, whichever is longer.;c. tangible fixed assets back;into cash, or 12 months, whichever is longer.;d. inventory back into cash, or;12 months, whichever is longer.;33. The current;assets section of the balance sheet should include;a. machinery.;b. patents.;c. goodwill.;d. inventory.;34. Which of the;following is a current asset?;a. Cash surrender value of a life;insurance policy of which the company is the bene-ficiary.;b. Investment in equity;securities for the purpose of controlling the issuing company.;c. Cash designated for the;purchase of tangible fixed assets.;d. Trade installment receivables;normally collectible in 18 months.;35. Which of the;following should not be considered as a current asset in the balance sheet?;a. Installment notes receivable;due over 18 months in accordance with normal trade practice.;b. Prepaid taxes which cover;assessments of the following operating cycle of the business.;c. Equity or debt securities;purchased with cash available for current operations.;d. The cash surrender value of a;life insurance policy carried by a corporation, the beneficiary, on its;president.;36. Equity or debt;securities held to finance future construction of additional plants should be;classified on a balance sheet as;a. current assets.;b. property, plant, and;equipment.;c. intangible assets.;d. long-term investments.;37. When a portion of;inventories has been pledged as security on a loan;a. the value of the portion;pledged should be subtracted from the debt.;b. an equal amount of retained;earnings should be appropriated.;c. the fact should be disclosed;but the amount of current assets should not be affected.;d. the cost of the pledged;inventories should be transferred from current assets to noncurrent assets.;38. Which of the;following is not a long-term investment?;a. Cash surrender value of life;insurance;b. Franchise;c. Land held for speculation;d. A sinking fund;39. A generally;accepted method of valuation is;1. trading securities at market;value.;2. accounts receivable at net;realizable value.;3. inventories at current cost.;a. 1;b. 2;c. 3;d. 1 and 2;40. Which item below;is not a current liability?;a. Unearned revenue;b. Stock dividends distributable;c. The currently maturing portion;of long-term debt;d. Trade accounts payable;41. Working capital;is;a. capital which has been;reinvested in the business.;b. unappropriated retained;earnings.;c. cash and receivables less;current liabilities.;d. none of these.;42. An example of an;item which is not an element of working capital is;a. accrued interest on notes;receivable.;b. goodwill.;c. goods in process.;d. temporary investments.;43. Long-term;liabilities include;a. obligations not expected to be;liquidated within the operating cycle.;b. obligations payable at some;date beyond the operating cycle.;c. deferred income taxes and most;lease obligations.;d. all of these.;44. Which of the;following should be excluded from long-term liabilities?;a. Obligations payable at some;date beyond the operating cycle;b. Most pension obligations;c. Long-term liabilities that;mature within the operating cycle and will be paid from a sinking fund;d. None of these;45. Treasury stock;should be reported as a(n);a. current asset.;b. investment.;c. other asset.;d. reduction of stockholders;equity.;46. Which of the;following should be reported for capital stock?;a. The shares authorized;b. The shares issued;c. The shares outstanding;d. All of these;47. Which of the;following would be classified in a different major section of a balance sheet;from the others?;a. Capital stock;b. Common stock subscribed;c. Stock dividend distributable;d. Stock investment in affiliate;48. The stockholders;equity section is usually divided into what three parts?;a. Preferred stock, common stock;treasury stock;b. Preferred stock, common stock;retained earnings;c. Capital stock, additional paid-in;capital, retained earnings;d. Capital stock, appropriated;retained earnings, unappropriated retained earnings;49. Which of the;following is not an acceptable major asset classification?;a. Current assets;b. Long-term investments;c. Property, plant, and equipment;d. Deferred charges;50. Which of the;following is a contra account?;a. Premium on bonds payable;b. Unearned revenue;c. Patents;d. Accumulated depreciation;51. Which of the;following balance sheet classifications would normally require the greatest;amount of supplementary disclosure?;a. Current assets;b. Current liabilities;c. Plant assets;d. Long-term liabilities;52. The presentation;of long-term liabilities in the balance sheet should disclose;a. maturity dates.;b. interest rates.;c. conversion rights.;d. All of the above.;53. Which of the;following is not a required supplemental disclosure for the balance sheet?;a. Contingencies;b. Financial forecasts;c. Accounting policies;d. Contractual situations;54. Typical;contractual situations that are disclosed in the notes to the balance sheet;include all of the following except;a. debt covenants;b. lease obligations;c. advertising contracts;d. pension obligations;55. Accounting;policies disclosed in the notes to the financial statements typically include;all of the following except;a. the cost flow assumption used;b. the depreciation methods used;c. significant estimates made;d. significant inventory;purchasing policies;56. Which of the;following best exemplifies a contingency that is reported in the notes to the;financial statements?;a. Losses from potential future;lawsuits;b. Loss from a lawsuit settled;out of court prior to the end of the fiscal year;c. Warranty claims on future;sales;d. Estimated loss from an ongoing;lawsuit;57. Which of the;following is not a method of disclosing pertinent information?;a. Supporting schedules;b. Parenthetical explanations;c. Cross reference and contra;items;d. All of these are methods of;disclosing pertinent information.;58. Significant;accounting policies may not be;a. selected on the basis of;judgment.;b. selected from existing;acceptable alternatives.;c. unusual or innovative in;application.;d. omitted from;financial-statement disclosure.;59. A general;description of the depreciation methods applicable to major classes of;depreci-able assets;a. is not a current practice in;financial reporting.;b. is not essential to a fair;presentation of financial position.;c. is needed in financial;reporting when company policy differs from income tax policy.;d. should be included in;corporate financial statements or notes thereto.;60. It is mandatory;that the essential provisions of which of the following be clearly stated in;the notes to the financial statements?;a. Stock option plans;b. Pension obligations;c. Lease contracts;d. All of these


Paper#37636 | Written in 18-Jul-2015

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