Question 1

Which of the following would not normally be classified as a non-current liability?

Accepted Answer

A)  current portion of non-current debt
B)  bonds payable
C)  mortgage payable
D)  lease liabilitiesE) None of the above
F) A) and C)

Question 2

Working capital is

Accepted Answer

A)  the difference between total assets and current liabilities.
B)  the excess of current assets over current liabilities.
C)  the difference between current assets and total liabilities.
D)  the excess of total assets over total liabilities.E) None of the above
F) A) and B)

Question 3

Which of the following is a constraint in accounting?

Accepted Answer

A)  comparability
B)  cost
C)  faithful representation
D)  timelinessE) All of the above
F) B) and D)

Question 4

Materiality and relevance are both defined in terms of what influences or makes a difference to a decision maker.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not an enhancing qualitative characteristic?

Accepted Answer

A)  verifiability
B)  faithful representation
C)  comparability
D)  timelinessE) A) and C)
F) None of the above

Question 6

A single ratio by itself is not very meaningful.

Accepted Answer

A) True 
 B)False

Question 7

Long-term investments appear in the property, plant, and equipment section of the statement of financial position.

Accepted Answer

A) True 
 B)False

Question 8

Consistency aids comparability when a company uses the same accounting principles and methods from year to year or when companies with similar circumstances use the same accounting principles.

Accepted Answer

A) True 
 B)False

Question 9

A measure of profitability is the

Accepted Answer

A)  current ratio.
B)  debt to total assets ratio.
C)  basic earnings per share.
D)  working capital.E) None of the above
F) B) and D)

Question 10

The current ratio is calculated as

Accepted Answer

A)  current assets plus current liabilities.
B)  current assets minus current liabilities.
C)  current assets divided by current liabilities.
D)  current assets times current liabilities.E) A) and D)
F) C) and D)

Question 11

Which of the following statements is true?

Accepted Answer

A)  A current ratio of 1.2 to 1 indicates that a company's current assets are less than its current liabilities.
B)  All companies, regardless of size, should have a current ratio of at least 2:1.
C)  The current ratio is a more dependable indicator of liquidity than working capital.
D)  The use of the current ratio does not make it possible to compare companies of different sizes.E) B) and D)
F) None of the above

Question 12

Use the following information to answer questions 
 
-What is the debt to total assets?

Accepted Answer

A)  12.5%
B)  20.0%
C)  75.0%
D)  16.7%E) None of the above
F) C) and D)

Question 13

Shareholders' equity

Accepted Answer

A)  is divided into at least two parts: share capital and retained earnings.
B)  consists of two parts: common and preferred shares.
C)  reflects two parts: dividends declared and share capital.
D)  reflects retained earnings only.E) All of the above
F) None of the above

Question 14

The key components of the conceptual framework include

Accepted Answer

A)  the objective of financial reporting, qualitative characteristics, the going concern assumption, elements of financial statements and the measurement of those elements.
B)  the objective of financial reporting, qualitative characteristics, the going concern assumption, and elements of financial statements.
C)  the objective of financial reporting, qualitative characteristics, the going concern assumption, and measurement of the elements of financial statements.
D)  the objective of financial reporting, qualitative characteristics and the going concern assumption.E) A) and B)
F) A) and C)

Question 15

Elements of financial statements include assets, equity, and expenses, but not liabilities.

Accepted Answer

A) True 
 B)False

Question 16

Working capital is a measure of

Accepted Answer

A)  comparability.
B)  liquidity.
C)  profitability.
D)  solvency.E) A) and B)
F) All of the above

Question 17

A liquidity ratio measures the

Accepted Answer

A)  net income or operating success of a company over a period of time.
B)  ability of a company to survive over a long period of time.
C)  short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash.
D)  percentage of total financing provided by creditors.E) A) and D)
F) A) and C)

Question 18

Comparability in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next.

Accepted Answer

A) True 
 B)False

Question 19

Liquidity ratios are concerned with the frequency and amounts of dividend payments.

Accepted Answer

A) True 
 B)False

Question 20

The statement of financial position is normally presented as follows, when listed in order of liquidity: Current assets, current liabilities, non-current assets, non-current liabilities, and shareholders' equity.

Accepted Answer

A) True 
 B)False

Exam 2: A Further Look at Financial Statements

Shareholders' equity

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Liquidity ratios are concerned with the frequency and amounts of dividend payments.

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Use the following information to answer questions -What is the debt to total assets?

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Long-term investments appear in the property, plant, and equipment section of the statement of financial position.

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Materiality and relevance are both defined in terms of what influences or makes a difference to a decision maker.

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Consistency aids comparability when a company uses the same accounting principles and methods from year to year or when companies with similar circumstances use the same accounting principles.

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The statement of financial position is normally presented as follows, when listed in order of liquidity: Current assets, current liabilities, non-current assets, non-current liabilities, and shareholders' equity.

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The key components of the conceptual framework include

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Elements of financial statements include assets, equity, and expenses, but not liabilities.

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A liquidity ratio measures the

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Working capital is a measure of

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A measure of profitability is the

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Which of the following would not normally be classified as a non-current liability?

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A single ratio by itself is not very meaningful.

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Which of the following statements is true?

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Which of the following is not an enhancing qualitative characteristic?

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The current ratio is calculated as

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Working capital is

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Which of the following is a constraint in accounting?

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Comparability in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next.

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