ACC 231 Chapter 5 Question and answers
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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 -CORRECTANSWER d. All of these
The balance sheet is useful for analyzing all of the following except
a. liquidity.
b. solvency.
c. profitability.
d. financial flexibility. -CORRECTANSWER c.Profitability
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 -CORRECTANSWER b.analyze cash inflows and outflows
for the period
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 -CORRECTANSWER d.determining free cash flows
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 -CORRECTANSWER d.valuation of items at
historical cost
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. -CORRECTANSWER
c.determining the increase in cash due to operations
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. -
CORRECTANSWER b.the extensive use of separate classifications
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. -CORRECTANSWER c.liquidity
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 -CORRECTANSWER d.none of these
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.
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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 -CORRECTANSWER d. All of these
The balance sheet is useful for analyzing all of the following except
a. liquidity.
b. solvency.
c. profitability.
d. financial flexibility. -CORRECTANSWER c.Profitability
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 -CORRECTANSWER b.analyze cash inflows and outflows
for the period
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 -CORRECTANSWER d.determining free cash flows
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 -CORRECTANSWER d.valuation of items at
historical cost
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. -CORRECTANSWER
c.determining the increase in cash due to operations
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. -
CORRECTANSWER b.the extensive use of separate classifications
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. -CORRECTANSWER c.liquidity
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 -CORRECTANSWER d.none of these
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.
