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Exam 3: The Balance Sheet and Financial Disclosures

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Question 41

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A payment on account has no effect on working capital but will increase the current ratio if it is already greater than 1.0.

A) True
B) False

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Question 42

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Briefly explain what is meant by a subsequent event. Give two examples of subsequent events.

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A subsequent event is a significant even...

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Question 43

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The balance sheet reports a company's financial position at a point in time.

Which of the following would be disclosed in the summary of significant accounting policies disclosure note?

Assets do not include:

-Current assets

The December 31, 2013, post-closing trial balance ($ in thousands) for Libby Corporation is presented below: Required: Prepare a classified balance sheet for Libby Corporation at December 31, 2013.

Which of the following is not a required segment reporting disclosure according to U.S. GAAP?

You are reviewing the December 31, 2013, financial statements of Ellie's Antiques. Ellie's management is considering an initial public offering of their shares. The following items come to your attention: a. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 2014. The bonds were purchased November 20, 2013. b. The property, plant, and equipment account is stated at cost, except that it includes a parcel of land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the value of the land has been written up to $60,000. The company has an independent appraisal that attests to this amount. c. The accounts receivable account includes $20,000 due in three years from officers and employees and a two-year, 8% note for $25,000 due from a customer. The loan enabled the customer to buy equipment needed to process materials purchased from Ellie's Antiques. Required: Determine the proper balance sheet presentation and amounts for the above items.

Notes payable:

-Noncurrent assets

Which is a shareholders' equity account in the balance sheet?

Altoid Co.'s acid-test ratio. Round your answer to two decimal places.

What would Symphony report as total shareholders' equity?

A company's market value is generally less than its book value.

You are the independent accountant assigned to the audit of Neophyte Company. The company's accountant, a graduate of Rival State University, has prepared financial statements that contained the following questionable items: a. The balance sheet reports land at $100,000. Included in this amount is a property held for speculation at a cost of $30,000. b. Current liabilities include $50,000 for long-term debt that is due in three months. The company has received a suitable firm commitment to refinance the debt for five years and intends to do so. c. Investments in marketable securities include $20,000 in short-term, high-grade commercial paper, which is a cash equivalent. Required: Describe the appropriate balance sheet presentation for the above items.

Payment terms, interest rates, and other details of long-term liabilities usually are reported in disclosure notes.

Segment reporting requires disclosure of each customer that accounts for more than 5% of total enterprise revenue.

All current assets are either cash or assets that will be converted into cash or consumed within 12 months or the operating cycle, whichever is longer.

A subsequent event for an entity with a December 31, 2013, year-end would not include: