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Chapter 003 The Balance Sheet and Financial Disclosures True / False Questions1.The balance sheet reports a company's financial position at a point in time.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 1Level of Learning: 1 2.A company's market value is generally less than its book value.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 1Level of Learning: 1 3.All current assets are either cash or assets that will be converted into cash or consumed within twelve months or the operating cycle, if that is longer than one year.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 2Level of Learning: 1 4.The balance of net receivables represents the amount expected to be collected.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 3Level of Learning: 13-1Chapter 003 The Balance Sheet and Financial Disclosures 5.Prepaid expenses are classified as current assets if the services purchased are expected to expire within twelve months or the operating cycle, if that is longer.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 3Level of Learning: 1 6.Operational assets include property, plant, equipment and inventories.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 3Level of Learning: 1 7.Intangible assets usually are reported in the balance sheet as current assets.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 3Level of Learning: 1 8.Accrued salaries and wages in a balance sheet represent salary and wages that have been earned by employees but not yet paid.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 4Level of Learning: 1 3-2Chapter 003 The Balance Sheet and Financial Disclosures9.The criteria for determining which items comprise cash equivalents often is disclosed in thesummary of significant accounting policies.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 5Level of Learning: 1 10.Payment terms, interest rates, and other details of long-term liabilities usually are reportedin disclosure notes.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 5Level of Learning: 1 11.Subsequent events are significant developments that take place after a firm's year-end, andafter the financial statements are issued.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 5Level of Learning: 1 12.Illegal acts will only need to be disclosed if the impact of the act is material.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 5Level of Learning: 1 3-3Chapter 003 The Balance Sheet and Financial Disclosures13.The ultimate responsibility for the financial statements lies with the auditors.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 6Level of Learning: 1 14.The compensation of top executives is disclosed in the proxy statement.TRUEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 6Level of Learning: 1 15.Horizontal analysis involves expressing each item in the financial statements as a percentage of an appropriate total, or base amount, within the same year.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 8Level of Learning: 1 16.Liquidity refers to the riskiness of a company with regard to the amount of liabilities in its capital structure.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: 9Level of Learning: 1 3-4Chapter 003 The Balance Sheet and Financial Disclosures17.A payment on account has no effect on working capital but will increase the current ratio if it is already greater than 1.0.TRUEAACSB: AnalyticBlooms: ComprehensionLearning Objective: 9Level of Learning: 2 18.Segment reporting requires disclosure of each customer that accounts for more than 5% oftotal enterprise revenue.FALSEAACSB: Reflective thinkingBlooms: KnowledgeLearning Objective: AppendixLevel of Learning: 1 3-5Chapter 003 The Balance Sheet and Financial DisclosuresEssay QuestionsListed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase.Terms:A. Accrued liabilitiesB. Current liabilitiesC. Intangible assetD. LiquidityE. Long-term solvencyF. Notes receivableG. Qualified opinionH. Proxy statementI. Times interest earned ratioJ. Unqualified opinion19.____ Will be satisfied in the next year or the operating cycle, whichever is longer.BAACSB: Reflective thinkingBlooms: Comprehension 20.____ Presented fairly in conformity with GAAP.JAACSB: Reflective thinkingBlooms: Comprehension 3-6Chapter 003 The Balance Sheet and Financial Disclosures21.____ The larger the better from a debt holder's perspective.IAACSB: Reflective thinkingBlooms: Comprehension 22.____ Supported by a negotiable instrument.FAACSB: Reflective thinkingBlooms: Comprehension 23.____ Expenses incurred but not yet paid.AAACSB: Reflective thinkingBlooms: Comprehension 3-7Chapter 003 The Balance Sheet and Financial DisclosuresListed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase.Terms:A. Accrued liabilitiesB. Current liabilitiesC. Intangible assetD. LiquidityE. Long-term solvencyF. Notes receivableG. Qualified opinionH. Proxy statementI. Times interest earned ratioJ. Unqualified opinion24.____ Scope limitation or a departure from GAAP.GAACSB: Reflective thinkingBlooms: Comprehension 25.____ Related to the debt to equity ratio.EAACSB: Reflective thinkingBlooms: Comprehension 26.____ Relates to the amount of time before an asset is converted to cash or a liability is paid.DAACSB: Reflective thinkingBlooms: Comprehension 3-8Chapter 003 The Balance Sheet and Financial Disclosures27.____ Recorded when an expense is incurred but not yet paid.AAACSB: Reflective thinkingBlooms: Comprehension 28.____ Ownership of an exclusive right.CAACSB: Reflective thinkingBlooms: Comprehension Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each


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nova ACT 3050 - Exam

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