Saturday, October 10, 2020

When a company owes employee salaries at the end of the period but fails to make an adjusting entry for that amount owed, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Current assets in a classified balance sheet are typically listed in order of:

A) Operational functionality.

B) Lowest to highest amount.

C) Importance to the company's profitability.

D) Liquidity.

Answer: D

The liquidity of an asset in a classified balance sheet refers to:

A) The dollar magnitude of the asset.

B) How quickly the asset will be converted to cash.

C) The length of time for which the company has owned the asset.

D) The likelihood that the asset will help to increase the company's profitability.

Answer: B

Resources owned by the company that will provide a benefit for more than one year are called:

A) Current assets.

B) Current liabilities.

C) Long-term assets.

D) Revenues.

Answer: C

With respect to current assets, liquidity refers to:

A) How quickly the asset can be converted to cash.

B) The magnitude of the asset's account balance.

C) Whether cash was paid for the asset at the time of acquisition.

D) The accuracy of the balance being reported.

Answer: A

Current assets include:

A) Assets that must be paid for within 12 months.

B) Assets that will be used up or converted to cash within 12 months.

C) Assets that will be used for many years.

D) Any assets that were purchased for cash.

Answer: B

The following financial information is from Shovels Construction Company:

Accounts Payable $ 15,000

Buildings 80,000

Cash 10,500

Accounts Receivable 9,500

Sales Tax Payable 4,500

Retained Earnings 47,500

Supplies 40,000

Notes Payable (due in 18 months) 35,000

Interest Payable 3,000

Common Stock 35,000

What is the amount of current assets, assuming the accounts above reflect normal activity?

A) $20,000.

B) $60,000.

C) $140,000.

D) $175,000.

Answer: B