Question 1 5 / 5 points
Which item below would NOT be a quality of financial reporting issue related to the balance sheet?
Question options:
Mismatching the type of debt (short or long-term) used to finance assets
Discretionary expenses
Overvaluation of assets
Off-balance sheet financing
Question 2 5 / 5 points
Which of the following statements is FALSE?
Question options:
Companies are allowed to use more than one inventory valuation method.
LIFO is an income tax concept.
Using FIFO for high-technology products makes sense if the firm is trying to reduce taxes because the technology industry is generally deflationary.
Companies using IFRS may not reverse entries for inventory write-downs if the market recovers.
Question 3 5 / 5 points
Which of the following statements is FALSE?
Question options:
Common-size balance sheets allow for comparison of firms with different levels of total assets by introducing a common denominator.
The common-size balance sheet reveals the composition of assets within major categories.
Each item on a common-size balance sheet is expressed as a percentage of sales.
The common-size balance sheet reveals the capital and the debt structure of the firm.
Question 4 5 / 5 points
Companies that are paid in advance for services or products record a(n) __________ on the receipt of cash referred to as unearned revenue or deferred credits.
Question options:
liability
receivable
asset
accrued asset
Question 5 5 / 5 points
A __________ expresses each item on the balance sheet as a percentage of total assets.
Question options:
ratio balance sheet
common-size balance sheet
relative balance sheet
usual and customary
Question 6 5 / 5 points
The balance sheet is also called the:
Question options:
statement of future.
statement of welfare.
statement of condition.
statement of potential position.
Question 7 0 / 5 points
How are deferred taxes recorded on the balance sheet?
Question options:
As current or noncurrent liabilities
As stockholders' equity
As noncurrent assets or noncurrent liabilities
As current or noncurrent assets or liabilities
Question 8 5 / 5 points
What are current assets?
Question options:
Assets purchased within the last year
Assets which will be used within the next month
Assets are the net working capital of the firm
Assets expected to be converted into cash within one year or operating cycle
Question 9 5 / 5 points
How are marketable securities valued on the balance sheet?
Question options:
Historical cost
At cost or fair value depending on how the securities are classified
Market value
At fair value with the difference between cost and fair value reported as revenue
Question 10 5 / 5 points
Which of the following items would NOT be classified as cash equivalents?
Question options:
U.S. Treasury bills
Trading securities
Commercial paper
Money market funds
Question 11 5 / 5 points
The net realizable value of accounts receivable is the actual amount of the account less an allowance for __________ accounts.
Question options:
future
questionable
unknown
doubtful
Question 12 5 / 5 points
Assume the following purchases of inventory for ABC Company and use this information to answer the following question.
Purchase # Purchase Price
1 $3
2 $4
3 $5
4 $6
5 $7
Assume ABC uses the average cost method of inventory valuation. What unit cost would be used to determine the amount in ending inventory or cost of goods sold?
Question options:
$3
$5
$7
$25
Question 13 5 / 5 points
Which of the following items should alert the analyst to the potential for manipulation when analyzing accounts receivable and the allowance for doubtful accounts?
Question options:
Sales, accounts receivable and the allowance for doubtful accounts are all growing at approximately the same rate.
A company lowers its credit standards and also increases the balance in the allowance for doubtful accounts.
Accounts receivable is growing at a large rate and the allowance for doubtful accounts is decreasing.
An analysis of the "Valuation and Qualifying Accounts" schedule required in the Form 10-K reveals that the amounts recorded for bad debt expense are close in amount to the actual amounts written off each year.
Question 14 5 / 5 points
The valuation of marketable securities on the balance sheet requires the separation of investment securities into three categories:
Question options:
held to maturity, negotiable securities, and securities available for sale.
held to maturity, negotiable securities, and securities available for purchase.
held to maturity, trading securities, and securities available for purchase.
held to maturity, trading securities, and securities available for sale.
Question 15 5 / 5 points
Which type of firm would most likely carry the most finished goods inventory?
Question options:
A manufacturing firm
A retail firm
A service firm
A wholesale firm
Question 16 5 / 5 points
Which item below does NOT describe a balance sheet?
Question options:
Assets = Liabilities + Stockholders' Equity
Financial position at a point in time
Assets – Liabilities = Stockholders' Equity
Assets + Liabilities = Stockholders' Equity
Question 17 5 / 5 points
A common-size balance sheet is useful to the analyst because it facilitates the __________ analysis of the firm.
Question options:
functional
structural
operational
cost
Question 18 0 / 5 points
Most manufacturing firms use the accelerated depreciation method and retailers use the __________ method for financial reporting purposes.
Question options:
reverse accelerated depreciation
accelerated depreciation (also)
straight-line depreciation
incremental depreciation
Question 19 5 / 5 points
If a company chooses the LIFO method of inventory valuation, which inventory will appear as ending inventory on the balance sheet?
Question options:
The last inventory purchased
The first inventory purchased
An average of all inventory purchased
The actual inventory which has not been sold
Question 20 5 / 5 points
Companies that use IFRS may switch the order of presentation of __________, listing noncurrent items before current items.
Question options:
assets and liabilities
liabilities and owner's equity
assets and owner's equity
owner's equity only
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