CH 3 smart book PDF

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CH 3 smart book...

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CH 3 The financial statement that displays a firm's financial position on a particular date is the period

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accounting

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Blank 2Blank

1 accounting , Incorrect

2 period , Incorrect Unavailable. (Enter one

Correct Answer Blank 1: balance Blank 2: sheet The ability of a company to alter cash flows in order to take advantage of unexpected investment opportunities is known as what?Financial flexibility

Correct Answer Financial flexibility Assets minus liabilities, measured according to GAAP, is not likely to be market

representative of the Blank 1Blank 1 market , Correct Unavailable value of the entity. (Enter only one word.) Which of the following are limitations of the balance sheet? (Select all that apply.)

Assets minus liabilities is not representative of the company's true market value The balance sheet is heavily reliant on estimates rather than determinable amounts The purpose of the balance sheet is to report a company's financial position on a specific date. The financial statement that provides information about liquidity and longterm solvency is the balance sheet flexibility

Financial Blank 1Blank 1 flexibility , Correct Unavailable is the ability of a company to alter cash flows in order to take advantage of unexpected investment opportunities and needs. (Enter only one word.) A company's assets minus its liabilities shown on the balance sheet is referred to as its ______ value. Book

True or false: The balance sheet displays all items at their fair value or market value. F

Classifying items on the balance sheet as current and noncurrent assists financial statement users in assessing what aspects about a company.

Solvency and liquidity. The two classifications used for assets and liabilities on the balance sheet are ______ and ______. current; noncurrent Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events are referred to as assets , Correct Unavailable. (Enter one word per blank)

assets

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What are the primary elements found on a balance sheet? assets, liabilities, and equity Cash and other assets that are reasonably expected to be converted to cash or consumed within 1 year or the current operating cycle are classified as current assets.

True or false: The operating cycle for most firms is 1 year or less. True assets

Simply put, Blank 1Blank 1 assets , Correct Unavailable are the economic resources of a company. (Enter only one word.) On the balance sheet, current assets are listed in the order of their what? Liquidity liabilities

The three primary elements found on a balance sheet are assets, Blank 1Blank 1 liabilities , Correct Unavailable, and shareholders' equity. (Enter only one word.)

Money on hand and in banks that is available for use in the operations of the cash

business is shown in the Blank 1Blank 1 stakeholders , Incorrect Unavailable account on the balance sheet. (Enter only one word.) Which of the following investments would be classified as a cash equivalent? (Select all that apply.)

Money market funds U.S. Treasury bills with a maturity of 90 days Commercial paper due in 1 month.

operating

The Blank 1Blank 1 operating , Correct Unavailable cycle refers to the period of time necessary to convert cash to raw materials, raw materials to a finished product, the finished product to receivables, and then receivables back to cash. (Enter only one word.) Which of the following items are considered cash equivalents? (Select all that apply.)

Commercial paper due in less than 3 months. Money market funds quickly converted into cash. Indicate the order of the following current assets on the balance sheet. CAIP Which of the following items is classified as cash? Bank drafts What is the criterion to classify an investment as a cash equivalent versus a shortterm investment? It is a highly liquid investment with a maturity date of 3 months or less from date of purchase. Current assets include which of the following? (Select all that apply.)

Cash Short term investments Which of the following items should not be included in cash and cash equivalents in the balance sheet? restricted cash Which of the following items should be classified as a short-term investment? Investments to be sold in 12 months. Which of the following items should be included in cash on the balance sheet? (Select all that apply.) CMC

current

Investments are reported as Blank 1Blank 1 assets , Incorrect Unavailable when the company has both the intent and ability to sell within one year (or operating cycle).

Owed by customer: Account receivable

Bear Corp. has $100,000 cash in the bank restricted to repay a note payable that matures in 2 years. How should this $100,000 be reported?

As restricted cash in the long-term section of the balance sheet. When a receivable is supported by a formal agreement that specifies payment notes

terms, it is called a Blank 1Blank 1 notes , Correct Unavailable 2Blank 2 receivable , Correct Unavailable. (Enter one word per blank.)

receivable

Blank

How should liquid investments expected to be converted to cash within the current operating cycle be reported in the balance sheet? As a short-term investment in the current asset section. An investment should be classified as current on the balance sheet if

it will be sold within 12 months. management has the intent and ability to liquidate it in the near term. Accounts receivable represents which of the following? The amount owed by customers. If an accounts receivable is due within 60 days, it is classified on the balance sheet short-term

as a(n) one word.)

Blank 1Blank 1 short-term , Correct Unavailable asset. (Enter only

Inventories include which of the following items? (Select all that apply.)

goods in production finished goods goods directly consumed in production Another term for a trade receivable that occurs in the course of a company's normal trade or business is accounts receivable. A manufacturing firm will use which of the following accounts to record inventory? (Select all that apply.)

raw material finished goods

work in process Investments in stock and debt securities of other corporations are included as _____ if the company has the ability and intent to sell them within the next 12 months. short-term investments Inventories held for sale in the normal course of business are classified in the balance sheet as current assets How are accounts receivable classified on the balance sheet? current asset Which of the following are included in inventory? (Select all that apply.)

Finished goods Work in process Raw materials Inventory for a wholesale or retail company includes which of the following? finished goods

Short-term investments are sometimes called which of the following? (Select all that apply.) Short-term marketable securities Temporary investments Which of the following are examples of prepaid expenses? (Select all that apply.)

Rent paid in advance. Prepaid insurance. Why are inventories reported as current assets? They are normally sold within the operating cycle. Schwinn is a company that makes bicycles. Which of the following items would be included in Schwinn's inventory? (Select all that apply.) BFB

On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for

rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a current asset? $12,000

Which of the following transactions would be recorded as a prepaid expense? (Select all that apply.)

Insurance paid for 6 months. Rent for an office building paid for 12 months. Rice Company purchases a building for $500,000, which will be used as a production facility. How should the building be classified on the balance sheet? noncurrent asset

Which of the following are noncurrent assets? (Select all that apply.)

land intangible assets building

Assets not used directly in the operations of the business are referred to as Blank 1Blank 1 investsment , Correct Unavailable. (Enter only one word.)

investsme

Assets are classified as long-term if: they are expected to be converted to cash or consumed in more than one operating cycle

Cash set aside for future plant expansion and a 3 year note receivable are both examples of what on a company's balance sheet? Investments

Which of the following are noncurrent assets? (Select all that apply.)

property machines investments with maturity of 18 months

Which of the following are characteristics of plant, property, and equipment? (Select all that apply.)

used long-term in production tangible asset

A prepaid expense represents a(n) Blank 1Blank 1 noncurrent , Incorrect Unavailable recorded when an expense is paid in advance. (Enter only one word.)

Land held for speculation, noncurrent receivables, and cash set aside for future plant expansion are all examples of Unavailable. (Enter only one word.)

asset

Blank 1Blank 1 noncurrent , Incorrect

Barsky Corp. has the following items: 60000

Property, plant, and equipment is a(n) ______ asset.

tangible long-lived On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a noncurrent asset? $24000

On January 1 of the current year, Lafferty signs a contract to rent a building for $1,000 per month for the next three years. On that date, Lafferty pays $36,000 for rent. On January 1 when payment is made, what is the amount of the prepaid rent that should be classified as a current asset? $12000

Which of the following items are included in property, plant, and equipment? (Select all that apply.)

furniture mineral mines

machines oil wells Land is listed separately on the balance sheet because it has an unlimited life.

Patents, copyrights, and franchises are examples of what? Intangibles

Which of the following items are included in investments? (Select all that apply.)

cash reserved to purchase land note receivable due in 5 years Goodwill is calculated as the acquisition price above the fair value of the identifiable net assets acquired.

When a company spends large amounts on research and development to obtain a patent on its own, the research and development cost is expensed as incurred.

Which of the following may be recorded on the balance sheet as intangible assets? (Select all that apply.)

trademarks patents copyrights Which of the following items should be disclosed in other long-term assets on the balance sheet? (Select all that apply.)

noncurrent investments that are not material long-term prepaid expenses

A technology company incurs costs to research and develop a new hand-held device and obtain a patent. This activity is an example of a(n) internally developed intangible asset.

How are property, plant, and equipment presented on the balance sheet? Original cost less accumulated depreciation

An asset that has no physical substance is referred to as a(n) ______ asset. Intangible

If a company's long-term investments are not material in amount, where should they be disclosed on the balance sheet?

other assets。 Goodwill is calculated as: the acquisition price above the fair value of the identifiable net assets acquired. When a company spends large amounts on research and development to obtain a patent on its own, the research and development cost is expensed as incurred.

What asset is listed as a separate item on the balance sheet because it has an unlimited life and is not depreciated? Land

Ownership of an exclusive right to something such as a product, a process, or a name is called what? Intangible asset

Which of the following items should be disclosed in other long-term assets on the balance sheet? (Select all that apply.)

long-term prepaid expenses noncurrent investments that are not material Goodwill is shown on the balance sheet when one company acquires another company for a price above the fair value of the assets acquired.

Balance sheets often include a catch-all classification of noncurrent assets other

called Blank 1Blank 1 investment , Incorrect Unavailable long-term assets. (Enter one word per blank)

A technology company incurs costs to research and develop a new hand-held device and obtain a patent. This activity is an example of a(n) internally developed intangible asset.

Other assets represents: a catch-all category of noncurrent assets

When a company spends large amounts on research and development to obtain a patent on its own, the research and development cost is expensed as incurred.

Land is listed separately on the balance sheet because it has an unlimited life.

What does a liability represent? Obligations owed to other entities

Patents, copyrights, and franchises are examples of what?

Intangibles

A liability is classified as current if it is due within 1 year or the current operating cycle, whichever is longer.

Deferred revenues and accrued salaries payable are examples of what? Current liabilities What is the difference between an account payable and a note payable? An account payable is usually due in 30–60 days. Which of the following are accrued liabilities? unearned revenues

liabilities

Obligations to other entities are classified as Blank 1Blank 1 liabilities , Correct Unavailable on the balance sheet. (Enter only one word.)

An expense that has been incurred but not yet paid results is a(n) accrued liability.

Which of the following should be classified as current liabilities? (Select all that apply.)

accounts payable accrued salaries current maturities of long-term debt What account is affected when a customer pays in advance for services to be performed in the future? deferred revenues

Which of the following are accrued liabilities? (Select all that apply.)

taxes payable utilities payable On January 1, Year 1, Renquist Corp. borrowed $100,000 by signing a 5-year note payable with annual interest of 8%. The terms of the contract require Renquist to repay the principal over 5 years with a payment of $20,000 made at the end of each year. On December 31, Year 1, Renquist made the first payment plus interest. On January 1, Year 2, what portion of the note should be classified as noncurrent liabilities? $60000

How are current liabilities satisfied? (Select all that apply.)

The use of current assets. The creation of other current liabilities....