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1. A statement of financial position allows investors to assess all of the following except the
A. Cost to acquire the asset., B. Face amount collectible at maturity., C. Cost to acquire minus accumulated amortization., D. Cost less expired or used portion.,
2. The purchase of treasury stock is recorded on the statement of financial position as a(n)
A. Efficiency with which enterprise assets are used., B. Liquidity and financial flexibility of the enterprise., C. Capital structure of the enterprise., D. Net realizable value of enterprise assets.,
3. Which one of the following is not a form of off-balance-sheet financing?
A. Entity point of view., B. Fund theory., C. Proprietary point of view., D. Enterprise theory.,
4. Question: 25A company pays more than the fair value to acquire treasury stock. The difference between the price paid to acquire the treasury stock and the fair value should be recorded as
A. Long-term liabilities., B. Current liabilities unless the debtor goes bankrup, C. Current liabilities unless the creditor has waived the right to demandrepayment for more than 1 year from the balance sheet date., D. Contingent liabilities until the violation is corrected.,
5. A company has outstanding accounts payable of $30,000 and a short-term construction loan in the amount of $100,000 at year end. The loan was refinanced through issuance of long-term bonds after year end but before issuance of financial statements. How should these liabilities be recorded in the balance sheet? .
A. The amounts at which current assets are carried and reported must reflect realizable cash values., B. Prepayments for items such as insurance or rent are included in an “otherassets” group rather than as current assets as they will ultimately be expensed. , C. The time period by which current assets are distinguished from noncurrentassets is determined by the seasonal nature of the business., D. Assets are classified as current if they are reasonably expected to berealized in cash or consumed during the normal operating cycle.,
6. A receivable classified as current on the statement of financial position is expected to be collected within
A. Classified as a current liability on the statement of financial position atDecember 31, Year 1., B. Classified as a long-term liability on the statement of financial position atDecember 31, Year 1., C. Retired as of December 31, Year 1., D. Considered off-balance-sheet debt.,
7. A manufacturer receives an advance payment for special-order goods that are to be manufactured and delivered within the next year. The advance payment should be reported in the manufacturer’s current-year statement of financial position as a(n)
A. May exceed the amount available for refinancing under the agreement., B. Depends on the demonstrated ability to consummate the refinancing., C. Is reduced by the proportionate change in the working capital ratio., D. Is zero unless the refinancing has occurred by year end.,
8. A statement of financial position is intended to help investors and creditors of a firm.
A. Assess the amount, timing, and uncertainty of prospective net cash inflows, B. Evaluate economic resources and obligations of a firm., C. Evaluate economic performance of a firm., D. Evaluate changes in the ownership equity of a firm,
9. Dixon Company has the following items recorded on its financial records: Available-for-sale securities $200,000 Prepaid expenses 400,000 Treasury stock 100,000 The total amount of the above items to be shown as assets on Dixon’s statement of financial position is
A. Current liability., B. Noncurrent liability., C. Contra asset amount., D. Accrued revenue.,
10. Long-term obligations that are or will become callable by the creditor because of the debtor’s violation of a provision of the debt agreement at the balance sheet date should be classified as
A. Operating revenue., B. Other revenue., C. Paid-in capital., D. Liability.,
11. Abernathy Corporation uses a calendar year for financial and tax reporting purposes and has $100 million of mortgage bonds due on January 15, Year 2. By January 10, Year 2, Abernathy intends to refinance this debt with new long-term mortgage bonds and has entered into a financing agreement that clearly demonstrates its ability to consummate the refinancing. This debt is to be
A. Noncurrent liabilities of $130,000., B. Current liabilities of $130,000., C. Current liabilities of $30,000, noncurrent liabilities of $100,000, D. Current liabilities of $130,000, with required footnote disclosure of therefinancing of the loan.,
12. Rice Co. was incorporated on January 1, Year 6, with $500,000 from the issuance of stock and borrowed funds of $75,000. During the first year of operations, net income was $25,000. On December 15, Rice paid a $2,000 cash dividend. No additional activities affected equity in Year 6. At December 31, Year 6, Rice’s liabilities had increased to $94,000. In Rice’s December 31, Year 6 balance sheet, total assets should be reported at
A. Computing rates of return., B. Evaluating capital structure., C. Assessing liquidity and financial flexibility., D. Determining profitability and assessing past performance.,
13. The accounting equation (assets – liabilities = equity) reflects the
A. It is to be converted into common stock before maturity., B. It matures within the year and will be retired through the use of current assets, C. Management plans to refinance it within the year., D. A bond retirement fund has been set up for use in its scheduled retirementduring the next year.,
14. Lister Company intends to refinance a portion of its short-term debt in Year 2 and is negotiating a long-term financing agreement with a local bank. This agreement would be noncancelable and would extend for a period of 2 years. The amount of short-term debt that Lister Company can exclude from its statement of financial position at December 31, Year 1,
A. $400,000, B. $500,000, C. $600,000 matching excercise , D. $700,000,
15. A statement of financial position provides a basis for all of the following except
A. The current operating cycle., B. 1 year., C. The current operating cycle or 1 year, whichever is longer., D. The current operating cycle or 1 year, whichever is shorter,
16. A cable television entity receives deposits from customers that are refunded when service is terminated. The average customer stays with the entity 8 years. How should these deposits be shown on the financial statements?
A. An asset., B. A liability., C. Shareholders’ equity., D. An expense.,
17. Noncurrent debt should be included in the current section of the statement of financial position if . Answer (B) is correct. Current liabilities include those obligations that are expected to be satisfied by the (1) payment of cash, (2) use of current assets other than cash, or (3) creation of new current liabilities within 1 year from the
A. Increase in assets., B. Decrease in liabilities., C. Increase in shareholders’ equity., D. Decrease in shareholders’ equity.,
18. The primary purpose of the statement of financial position is to reflect
A. $598,000, B. $600,000, C. $617,000, D. $692,000,
19. Prepaid expenses are valued on the statement of financial position at the
A. Amounts due in future years under operating leases., B. Transfers of accounts receivable without recourse., C. Current portion of long-term debt., D. Amounts due in future years under capital leases.,
20. Careful reading of an annual report will reveal that off-balance-sheet debt includes
A. Sale of receivables., B. Foreign currency translations. computer assisted language learning , C. Operating leases., D. Special purpose entities.,