Horngren’s Financial and Managerial Accounting, 6e (Miller-Nobles)
1) The balance sheet is the first financial statement that is prepared at the end of the period.
2) The statement of retained earnings shows how retained earnings changed during the period due to
acquiring assets and paying liabilities.
3) In a balance sheet, prepared under IFRS guidelines, cash is often shown as one of the last assets listed.
4) Assets and liabilities are presented in a different order on a balance sheet prepared following IFRS than
on a balance sheet prepared following U.S. GAAP.
5) Revenue may be called Profit and Net Income may be called Turnover in an income statement
prepared under IFRS.
6) Which of the following is NOT a balance sheet account?
A) Unearned Revenue
B) Prepaid Rent
C) Accumulated Depreciation – Building
D) Dividends
7) Which financial statement is prepared last?
A) income statement
B) balance sheet
C) statement of retained earnings
D) The financial statements can be prepared in any order.
8) The financial statement that reports assets, liabilities, and stockholders‘ equity as of the last day of the
period is called the ________.
A) income statement
B) statement of retained earnings
C) balance sheet
D) unadjusted trial balance
9) List the order in which the balance sheet, statement of retained earnings, and income statement are
prepared. Briefly discuss why this order is necessary.
10) In a balance sheet, assets are classified as either current or long term, depending on their liquidity.
11) Prepaid Rent is always classified as a long-term asset.
12) The operating cycle is the time span required for a business to repay its long-term liabilities.
13) A balance sheet prepared in the account form lists the assets at the top and the liabilities and
stockholders’ equity below.
14) A balance sheet prepared in the report form lists the assets on the left and the liabilities and
stockholders’ equity on the right.
15) A classified balance sheet can be presented in either a report or an account form. Although either is
acceptable, the report form is more popular.
16) A net loss from the balance sheet decreases Retained Earnings.
17) Liquidity is a measure of how quickly an item can be converted to net income.
18) In a classified balance sheet, assets are reported in the order of liquidity and liabilities are listed in the
order in which they must be paid.
19) Intangible assets are long-term assets that have no physical form and convey special rights.
20) The financial statements are prepared from the ________.
A) adjusted trial balance
B) chart of accounts
C) statement of retained earnings
D) unadjusted trial balance
21) Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within
the business‘s normal operating cycle if the cycle is longer than a year, are called ________ assets.
A) intangible
B) plant
C) long-term
D) current
22) The time span during which cash is paid for goods and services, which are then sold to customers
from whom the business collects cash, is called the ________.
A) production time
B) operating cycle
C) accounting cycle
D) sales time
23) All assets that will not be converted to cash or used up within the business’s operating cycle or one
year, whichever is greater, are called ________.
A) long-term assets
B) fully depreciated assets
C) current assets
D) current liabilities
24) Property, plant, and equipment are ________.
A) presented in order of the category name, with Land being presented last
B) also called fixed or plant assets
C) either tangible or intangible assets
D) easily converted to cash
25) Patents, copyrights, and trademarks are examples of ________.
A) short-term investments
B) fixed assets
C) long-term investments
D) intangible assets
26) Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ________.
A) short-term investments
B) fixed assets
C) current liabilities
D) long-term liabilities
27) Which of the following is a measure of how quickly an item can be converted to cash?
A) Debt ratio
B) Return on assets ratio
C) Liquidity
D) Accounting cycle
28) Which of the following is the most liquid asset?
A) Building
B) Prepaid Expenses
C) Accounts Receivable
D) Cash
29) Which of the following is a current asset that is expected to be converted to cash, sold, or consumed
during the next year (or the normal operating cycle, if longer)?
A) Land
B) Equipment
C) Building
D) Accounts Receivable
30) Under which of the following categories would bonds held as an investment for more than a year
appear?
A) current assets
B) long-term liabilities
C) long-term assets
D) current liabilities
31) Under which of the following categories would Accounts Receivable appear?
A) current assets
B) current liabilities
C) long-term assets
D) long-term liabilities
32) Under which of the following categories would bonds held as an investment for less than a year
appear?
A) long-term assets
B) current assets
C) long-term liabilities
D) current liabilities
33) Under which of the following categories would Accounts Payable appear?
A) long-term assets
B) current assets
C) long-term liabilities
D) current liabilities
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34) Which of the following is a plant asset?
A) Equipment
B) Patents
C) Trademark
D) Accounts Receivable
35) Notes Payable due within two years are classified as ________.
A) current liabilities
B) current assets
C) long-term liabilities
D) long-term assets
36) Assets with no physical form are ________.
A) current assets
B) intangible assets
C) not listed on the balance sheet because they have no value
D) included in stockholders’ equity
37) Which of the following is an example of an intangible asset?
A) Equipment
B) Plant
C) Property
D) Copyright