Chapter 4—The Balance Sheet and the Statement of Changes in
Stockholders’ Equity Key
1. If the owners’ equity at the end of the accounting period is greater than the owners’ equity at the beginning of
the accounting period, the firm’s
2. All of the following items would appear on the balance sheet except
3. The ease with which an asset can be converted into cash is termed
4. The quantity of goods or services produced in a given period or the physical capacity of the operating assets
used to produce goods or services are measures of
5. Which statement is false?
6. To be recognized in the financial statements, an item must meet the definition of an element and be
7. The ability of a company to adapt its resources to create change and react to change is called
8. Which of the following characteristics must an economic resource have in order to be classified as an asset?
9. Which is not a characteristic of an asset?
11. Probable future sacrifices of economic benefits arising from past transactions or events are
12. Which of the following is not a characteristic of a liability?
13. The residual interest in a company’s assets is represented by its
14. Which of the following assets is most likely reported at its historical cost on the balance sheet?
15. Assume an asset is measured by the amount of cash (or its equivalent) into which it is expected to be
converted in an orderly transaction between market participants on the date of measurement. Which
measurement alternative is in use in this case?
16. The valuation method primarily used in the balance sheets of business entities is
17. The expected exit value is also referred to as the
18. The amount of cash (or equivalent) that currently would be required to replace the service capacity of the
asset is called the asset’s
19. The measurement of an asset’s value that considers the discounted future cash inflows (and outflows)
relating to the asset is called the
20. GAAP disclosures for fair value measurements now require that fair value measurements using Level 3
inputs include all of the following except
21. Which of the following statements is not true regarding the hierarchy of fair value measurements now
provided in GAAP?
22. Which of the following is not a limitation of the balance sheet?
23. The balance sheet account that is usually reported at its fair market value is
24. Current assets are cash or other assets that are reasonably expected to be converted into cash, sold, or
consumed within one year or a normal operating cycle. An operating cycle is defined as the company’s ability
to
25. Selected information from a company’s balance sheet follows:
Long-term debt
$ 40
Retained earnings
30
Current assets
150
Property, plant, and equipment
60
Common stock
130
Current liabilities
50
Working capital amounts to
26. Which statement is not true?
27. Current liabilities would include all of the following except
28. Cash equivalents are securities that
29. Which of the following formulas represents working capital?
30. Current liabilities are defined as
31. Which of the following liabilities is properly classified as a current liability?
32. A leased asset under capital lease is disclosed on the balance sheet at its
33. Which is classified as a long-term investment?
34. Justification for having both intangible assets and other assets listed on a balance sheet include
35. The FASB has suggested guidelines for developing homogenous classes of assets and liabilities. For assets,
this can be accomplished by following guidelines that include
36. Which of the following would typically be recorded as an intangible asset?
37. Obligations that are not expected to require the use of current assets or the creation of other current
liabilities within one year or the normal operating cycle, if longer than a year, are called
38. Which of the following is least likely to be included in long-term liabilities?
39. Which of the following is typically recorded at its present value?
40. Which is a component of stockholders’ equity?
41. A deficit occurs when a company’s
42. On the balance sheet, treasury stock is classified as a(n)
43. Which statement is true?
44. State law may require that capital stock have which of the following values?
45. Which of the following would not be classified as contributed capital?
46. Which of the following account titles would not be included in contributed capital?
47. Changes in the separate stockholders’ equity accounts can be disclosed in all of the following ways, except
48. In preparing a statement of changes in stockholders’ equity, the company includes land given to a
stockholder as a dividend. This transaction is included in the statement because it represents
49. A reader of a set of financial statements would expect to be able to find in the statement of changes in
stockholders’ equity
50. Which of the following is not included in comprehensive income?
51. All of the following are examples of subsequent events that would be disclosed in the footnotes to the
financial statements except
52. According to APB Opinion No. 22, the initial note to the financial statements should describe
53. A reader might find information about gain contingencies in an annual report by examining
54. GAAP requires that all derivative financial instruments be reported at their
55. Activities between affiliated entities such as subsidiaries must be disclosed in the financial statements of a
corporation as
56. Under international accounting standards, liabilities and owners’ equity on the balance sheet usually appear
in which order?
57. The rationale for disclosing material subsequent events include all of the following except
58. Certain differences exist between IFRS and U.S. GAAP financial statement reporting. These include that
59. The integrated disclosures required by the SEC for all regulated companies include all of the following
except
60. The SEC established integrated disclosures to
61. If the balance sheet lists liabilities and stockholders’ equity sequentially under the assets, the format being
used is the
62. According to a recent issue of Accounting Trends and Techniques, the most frequently used balance sheet
format is the
63. Listed below are ten terms describing the purposes of the balance sheet. Following the list is a series of
descriptive phrases.
a.
financial position
f.
operating capability
b.
resource structure
g.
net assets
c.
financial structure
h.
financial capital
d.
liquidity
i.
physical capital
e.
financial flexibility
j.
recognition
____
1.
____
2.
____
3.
____
4.
____
5.
____
6.
____
7.
____
8.
____
9.
____
10.
Required:
Match each term with its descriptive statement by placing the appropriate letter in the space provided.
64. Individual assets are measured using one of five alternative methods. These methods are listed below,
followed by a series of descriptive statements.
a.
historical cost
b.
current cost
c.
exit value
d.
net realizable value
e.
present value
1.
j
6.
i
2.
g
7.
b
3.
e
8.
f
4.
a
9.
c
5.
d
10.
h
____
1.
____
2.
____
3.
____
4.
____
5.
Required:
Match each measurement alternative with its descriptive statement by placing the appropriate letter in the space provided.
65. Listed below are the five alternatives identified by the FASB for measuring balance sheet elements.
Following the list is a series of balance sheet elements.
a.
historical cost
b.
current cost
c.
exit value
d.
net realizable value
e.
present value
____
1.
____
2.
____
3.
____
4.
____
5.
____
6.
____
7.
____
8.
____
9.
____
10.
1.
d
2.
b
3.
e
4.
c
5.
a