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Exam 2: A Further Look at Financial Statements

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Question 41

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Trademarks would appear in which balance sheet section?

A) Intangible assets
B) Investments
C) Property, plant, and equipment
D) Current assets

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Question 42

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The most important information needed to determine if companies can pay their current obligations is the

A) net income for this year.
B) projected net income for next year.
C) relationship between current assets and current liabilities.
D) relationship between short-term and long-term liabilities.

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Question 43

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The periodicity assumption states

The primary accounting standard-setting body in the United States is the Securities and Exchange Commission.

Based on the following data, what is the amount of working capital? $\begin{array}{lr}\text {Accounts payable. }&\$64,000\\\text { Accounts receivable}&114,000\\\text { Cash }&70,000\\\text {Intangible assets }&100,000\\\text {Inventory. }&138,000\\\text { Long-term investments}&160,000\\\text { Long-term liabilities}&200,000\\\text {Short-term investments. }&80,000\\\text {Notes payable (short-term) }&56,000\\\text {Property, plant, and equipment }&1,340,000\\\text {Prepaid insurance }&2,000\\\end{array}$

The advantage of accounting information is that it provides exact and completely reliable measures.

Cash and supplies are both classified as current assets.

The economic entity assumption is that a company will remain in operations for the foreseeable future.

A useful measure of solvency is the

The ability of a business to pay obligations that are expected to become due within the next year or operating cycle is

Kingery Corporation has current assets of $1,800,000 and current liabilities of $750,000. If they issue $150,000 of new stock what will their new current ratio be? (rounded)

The debt to assets ratio is a

If Morris Corporation has a negative $131 million free cash flow, which of the following statements is most likely true?

The two fundamental qualities of useful information are

Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2017 $\begin{array}{lrlr}\text { Cash } & \$ 195,000 & \text { Accounts payable } & \$ 210,000 \\\text { Accounts receivable } & 150,000 & \text { Salaries and wages payable } & 30,000 \\\text { Inventory } & 165,000 & \text { Mortgage payable } & 240,000 \\\text { Prepaid insurance } & 90,000 & \text { Total liabilities } & \$ 480,000\\\text { Stock investments } & 255,000 \\\text { Land } & 270,000 \\\text { Buildings } \quad \$ 315,000& &\text { Common stock }&\$360,000\\\text { Less: Accumulated }&&\text { Retained earnings }&750,000\\\text { depreciation }\quad(60,000) &255,000&\text { Total stockholders' equity }&\$1,110,000\\\text { Trademarks } & 210,000 &\text { Total liabilities and }\\\text { Total assets } & \$ 1,590,000&\text { stockholders' equity }&\$1,590,000\end{array}$

The assumption that requires only those things that can be expressed in money are included in the accounting records is the

The Mac Company has four plants nationwide that cost $350 million. The current fair value of the plants is $300 million. The plants will be reported as assets at

Using the following balance sheet and income statement data, what is the total amount of working capital? $\begin{array} { l r l r } \text { Current assets } & \$ 32,000 & \text { Net income } & \$ 42,000 \\\text { Current liabilities } & 16,000 & \text { Stockholders' equity } & 78,000 \\\text { Average assets } & 160,000 & \text { Total liabilities } & 42,000 \\\text { Total assets } & 120,000 & &\end{array}$ Average common shares outstanding was 15,000.

The relationship between current assets and current liabilities is important in evaluating a company's

The excess of current assets over current liabilities is called working capital.