Intermediate Accounting Chapter 3
____ ____ is a popular measure of a company's ability to pay its short-term debt. -
ANS-Working capital
\_____ _____ result from the sale of goods or services on credit. - ANS-Accounts receivable
\_____ analysis examines the relationship of items on the financial statements of one year. -
ANS-Vertical
\______ are assets not used directly in the operations of the business. - ANS-Investments
\______ risk is the risk that a company will not be able to pay its obligations when they come
due. - ANS-default
\_________ represent obligations to other entities. - ANS-Liabilities
\A common method of analysis is to express a relationship between the two financial statement
items, such as net income divided by sales, and compare this relationship with previous years.
This comparison is referred to as ______ analysis. - ANS-ratio
\A company's total assets minus its total liabilities as shown on the balance sheet is known as
the _____ value. - ANS-Book
\A liability is classified as current if its due - ANS-within one year or the current operating cycle,
whichever is longer.
\A long term liability is an obligation that will not be satisfied within 1 year or the operating cycle,
whichever is _______. - ANS-longer.
\A ratio used to measure liquidity is the - ANS-Quick Ratio.
\a summary of significant accounting policies includes information regarding - ANS-the choice of
accounting policies.
\A temporary investment or short-term marketable security should be reported in which section
of the balance sheet? - ANS-current asset
\Additional _____ are critical to understanding financial statements and to evaluating a firm's
performance. - ANS-disclosures
\An asset that has no physical substance is an _______ asset. - ANS-intangible
\An expense that has been incurred but not yet paid results in an - ANS-incurred liability.
\Borrowing or lending money at an interest rate significantly different from the market interest
rate is an example of a _____ _____ transaction. - ANS-related party
\Cash set aside for future plant expansion and a 3 year note receivable are both examples of
what on a company's balance sheet? - ANS-investments
\Correctly match the accounting standard on the left with the description on the right. - ANS-U.S.
GAAP - Does not specify a minimum list of items to be presented.
IFRS - Specifies a minimum list of items to be presented.
\Correctly match the order in which liabilities are presented under U.S. GAAP and IFRS. -
ANS-U.S. GAAP - current liabilities are presented first
IFRS - Noncurrent liabilities are presented first
\Current assets include which of the following? - ANS-cash, short-term investments
\How are current liabilities satisfied? - ANS-The creation of other current liabilities, the use of
current assets
, \Identify the primary goal of the FASB / IASB financial statement presentation project. -
ANS-develop new common standards for presenting financial statements.
\if a company's long term investments are not material in amount, where should they be
disclosed on the balance sheet? - ANS-other assets
\If an accounts receivable is due within 60 days, it is classified on the balance sheet as a _____
_____. - ANS-current asset
\If an asset is expected to provide benefits beyond the current operating cycle, it should be
reported as a ______ asset. - ANS-noncurrent
\Indicate the correct order of the following current assets on the balance sheet. - ANS-1. cash
and cash equivalents
2. accounts receivable
3. inventory
4. prepaid assets
\Industrywide risk factors include which of the following? - ANS-Technological factors, labor
conditions, competition
\Items held for sale in the normal course of business are classified in the balance sheet as -
ANS-inventory.
\Land held for speculation, noncurrent receivables, and cash set aside for future plant
expansion are all examples of _____. - ANS-Investments
\On October 1, 2021, Jenkins Corp. signed a $10,000 interest bearing note payable at 10%
interest that matures on September 30, 2025. On December 31, 2021, what entry is required? -
ANS-An accrual for 3 months interest
\Other assets represents - ANS-a catch-all category of noncurrent assets
\Patents, copyrights, and franchises are examples of what? - ANS-intangibles
\Quick assets divided by current liabilities is which ratio? - ANS-Acid test ratio
\Retained earnings represents the accumulated _____ _____ reported since the inception of the
corporation and not yet paid to shareholders as dividends. - ANS-net income
\Schwinn is a company that makes bicycles. Which of the following items would be included in
Schwinn's inventory? - ANS-finished bicycles, bicycle chains, bicycle tires
\segments that must be disclosed are those which comprise 10% or more of total company
revenue, income, or _____. - ANS-assets
\Shareholders' Equity is composed of which of the following accounts? - ANS-Paid in capital,
Retained earnings
\Simply put, ______ are the economic resources of a company. - ANS-Assets
\The _____ and the _____ are jointly working on the Financial Statement Presentation project. -
ANS-FASB, IASB
\The ability of a company to alter cash flows in order to take advantage of unexpected
investment opportunities is known as what? - ANS-financial flexibility
\The auditors' report provides an opinion about the fairness of the financial statement that is -
ANS-professional, independent
\The balance sheet provides useful information about a company's _____ and long-term
solvency. - ANS-liquidity
\The current versus noncurrent classification applies to what in the financial statements? -
ANS-Assets and liabilities
____ ____ is a popular measure of a company's ability to pay its short-term debt. -
ANS-Working capital
\_____ _____ result from the sale of goods or services on credit. - ANS-Accounts receivable
\_____ analysis examines the relationship of items on the financial statements of one year. -
ANS-Vertical
\______ are assets not used directly in the operations of the business. - ANS-Investments
\______ risk is the risk that a company will not be able to pay its obligations when they come
due. - ANS-default
\_________ represent obligations to other entities. - ANS-Liabilities
\A common method of analysis is to express a relationship between the two financial statement
items, such as net income divided by sales, and compare this relationship with previous years.
This comparison is referred to as ______ analysis. - ANS-ratio
\A company's total assets minus its total liabilities as shown on the balance sheet is known as
the _____ value. - ANS-Book
\A liability is classified as current if its due - ANS-within one year or the current operating cycle,
whichever is longer.
\A long term liability is an obligation that will not be satisfied within 1 year or the operating cycle,
whichever is _______. - ANS-longer.
\A ratio used to measure liquidity is the - ANS-Quick Ratio.
\a summary of significant accounting policies includes information regarding - ANS-the choice of
accounting policies.
\A temporary investment or short-term marketable security should be reported in which section
of the balance sheet? - ANS-current asset
\Additional _____ are critical to understanding financial statements and to evaluating a firm's
performance. - ANS-disclosures
\An asset that has no physical substance is an _______ asset. - ANS-intangible
\An expense that has been incurred but not yet paid results in an - ANS-incurred liability.
\Borrowing or lending money at an interest rate significantly different from the market interest
rate is an example of a _____ _____ transaction. - ANS-related party
\Cash set aside for future plant expansion and a 3 year note receivable are both examples of
what on a company's balance sheet? - ANS-investments
\Correctly match the accounting standard on the left with the description on the right. - ANS-U.S.
GAAP - Does not specify a minimum list of items to be presented.
IFRS - Specifies a minimum list of items to be presented.
\Correctly match the order in which liabilities are presented under U.S. GAAP and IFRS. -
ANS-U.S. GAAP - current liabilities are presented first
IFRS - Noncurrent liabilities are presented first
\Current assets include which of the following? - ANS-cash, short-term investments
\How are current liabilities satisfied? - ANS-The creation of other current liabilities, the use of
current assets
, \Identify the primary goal of the FASB / IASB financial statement presentation project. -
ANS-develop new common standards for presenting financial statements.
\if a company's long term investments are not material in amount, where should they be
disclosed on the balance sheet? - ANS-other assets
\If an accounts receivable is due within 60 days, it is classified on the balance sheet as a _____
_____. - ANS-current asset
\If an asset is expected to provide benefits beyond the current operating cycle, it should be
reported as a ______ asset. - ANS-noncurrent
\Indicate the correct order of the following current assets on the balance sheet. - ANS-1. cash
and cash equivalents
2. accounts receivable
3. inventory
4. prepaid assets
\Industrywide risk factors include which of the following? - ANS-Technological factors, labor
conditions, competition
\Items held for sale in the normal course of business are classified in the balance sheet as -
ANS-inventory.
\Land held for speculation, noncurrent receivables, and cash set aside for future plant
expansion are all examples of _____. - ANS-Investments
\On October 1, 2021, Jenkins Corp. signed a $10,000 interest bearing note payable at 10%
interest that matures on September 30, 2025. On December 31, 2021, what entry is required? -
ANS-An accrual for 3 months interest
\Other assets represents - ANS-a catch-all category of noncurrent assets
\Patents, copyrights, and franchises are examples of what? - ANS-intangibles
\Quick assets divided by current liabilities is which ratio? - ANS-Acid test ratio
\Retained earnings represents the accumulated _____ _____ reported since the inception of the
corporation and not yet paid to shareholders as dividends. - ANS-net income
\Schwinn is a company that makes bicycles. Which of the following items would be included in
Schwinn's inventory? - ANS-finished bicycles, bicycle chains, bicycle tires
\segments that must be disclosed are those which comprise 10% or more of total company
revenue, income, or _____. - ANS-assets
\Shareholders' Equity is composed of which of the following accounts? - ANS-Paid in capital,
Retained earnings
\Simply put, ______ are the economic resources of a company. - ANS-Assets
\The _____ and the _____ are jointly working on the Financial Statement Presentation project. -
ANS-FASB, IASB
\The ability of a company to alter cash flows in order to take advantage of unexpected
investment opportunities is known as what? - ANS-financial flexibility
\The auditors' report provides an opinion about the fairness of the financial statement that is -
ANS-professional, independent
\The balance sheet provides useful information about a company's _____ and long-term
solvency. - ANS-liquidity
\The current versus noncurrent classification applies to what in the financial statements? -
ANS-Assets and liabilities
