KU ACCT 320 Final Exam with complete
solution already passed
Usefulness and purpose of the balance sheet - correct answer ✔✔1. Provides information
about an entity's assets, liabilities, and equity.
2. Evaluation of liquidity, solvency, and financial flexibility.
3. Aids in assessing risk and predicting future cash flows.
Liquidity - correct answer ✔✔Time it takes to convert a non-cash asset into cash
Solvency - correct answer ✔✔Ability to meet debt obligations as they come due
Financial flexibility - correct answer ✔✔Relates to the debt/equity mix in the capital structure
Limitations of the balance sheet - correct answer ✔✔1. Many assets and liabilities are reported
at historical cost.
2. Estimates and judgements must be utilized
3. Omits many items that are of financial value to the business.
Major classifications in the balance sheet - correct answer ✔✔assets, liabilities, equity
Assets - correct answer ✔✔Probable future economic benefits obtained or controlled by a
particular entity as a result of past transactions or events
, Liabilities - correct answer ✔✔probable future sacrifices of economic benefits arising from
present obligations of a particular entity to transfer assets or provide services to other entities
in the future as a result of past transactions or events
Equity - correct answer ✔✔Residual interest in the assets of an entity that remains after
deducting its liabilities. In a business enterprise, the equity is the ownership interest.
Major sub classifications in the balance sheet - correct answer ✔✔Current assets, non-current
assets, current liabilities, long-term liabilities, equity (owners equity or shareholders' equity)
Current assets - correct answer ✔✔Resources that are expected to be turned into cash, sold, or
consumed within a year or the operating cycle, whichever is longer
Items included in the current asset section are.... - correct answer ✔✔Presented in the order of
liquidity
Order of liquidity of current assets - correct answer ✔✔Cash, short-term investments,
receivables, inventories, prepaid expenses
Non-current assets - correct answer ✔✔long-term investments, property, plant, and
equipment, intangible assets, other assets
Long-term investments - correct answer ✔✔Management intent is to hold these investments
for an extended period of time
Property, Plant, and Equipment - correct answer ✔✔Durable physical property such as land,
buildings, machinery, furniture, and "wasting resources" (timberland, minerals) used in
operations
solution already passed
Usefulness and purpose of the balance sheet - correct answer ✔✔1. Provides information
about an entity's assets, liabilities, and equity.
2. Evaluation of liquidity, solvency, and financial flexibility.
3. Aids in assessing risk and predicting future cash flows.
Liquidity - correct answer ✔✔Time it takes to convert a non-cash asset into cash
Solvency - correct answer ✔✔Ability to meet debt obligations as they come due
Financial flexibility - correct answer ✔✔Relates to the debt/equity mix in the capital structure
Limitations of the balance sheet - correct answer ✔✔1. Many assets and liabilities are reported
at historical cost.
2. Estimates and judgements must be utilized
3. Omits many items that are of financial value to the business.
Major classifications in the balance sheet - correct answer ✔✔assets, liabilities, equity
Assets - correct answer ✔✔Probable future economic benefits obtained or controlled by a
particular entity as a result of past transactions or events
, Liabilities - correct answer ✔✔probable future sacrifices of economic benefits arising from
present obligations of a particular entity to transfer assets or provide services to other entities
in the future as a result of past transactions or events
Equity - correct answer ✔✔Residual interest in the assets of an entity that remains after
deducting its liabilities. In a business enterprise, the equity is the ownership interest.
Major sub classifications in the balance sheet - correct answer ✔✔Current assets, non-current
assets, current liabilities, long-term liabilities, equity (owners equity or shareholders' equity)
Current assets - correct answer ✔✔Resources that are expected to be turned into cash, sold, or
consumed within a year or the operating cycle, whichever is longer
Items included in the current asset section are.... - correct answer ✔✔Presented in the order of
liquidity
Order of liquidity of current assets - correct answer ✔✔Cash, short-term investments,
receivables, inventories, prepaid expenses
Non-current assets - correct answer ✔✔long-term investments, property, plant, and
equipment, intangible assets, other assets
Long-term investments - correct answer ✔✔Management intent is to hold these investments
for an extended period of time
Property, Plant, and Equipment - correct answer ✔✔Durable physical property such as land,
buildings, machinery, furniture, and "wasting resources" (timberland, minerals) used in
operations
