Exam 3: The Balance Sheet and Financial Disclosures

Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement: Required: Compute the following for Bronco: -Current assets

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Question 1

Correct Answer:

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Current assets (CA/Current Liabilities (CL)) = 3; therefore, CA = 3CL
Quick assets (QA/Current Liabilities) = 2.25; therefore, QA = 2.25CL
QA = CA − Inventory = CA − $150,000
2.25CL = 3CL − $150,000
.75CL = $150,000
CL = $200,000
CA = 3CL = $600,000

When a company pays its bill from a plumber for previous services on account:

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Question 2

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The following balance sheet information (in $ millions) comes from the Annual Report to Shareholders of Merry International Inc. for the 2018 fiscal year. Certain amounts have been replaced with question marks to test your understanding of balance sheets. In addition, you are provided with the following information from an analysis of Merry's financial position at the same date: Current ratio = 1.352259; Acid-test ratio = 0.5769692; Debt to equity ratio = 4.6675078. Required: Compute the missing amounts (rounded to the nearest $ in millions) in the balance sheet.

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Question 3

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The completed balance sheet is shown below. To solve the problem, students can start by using the debt to equity ratio to solve for total liabilities ($1,585 × 4.6675078 = $7,398 in total liabilities). Then they can determine the other missing data in the bottom half of the balance sheet by subtraction. With total liabilities and shareholders' equity known, so are the total assets. The current assets can be computed by the current ratio ($2,501 × 1. 352259 = $3,382 in current assets). The quick assets can be found from the acid-test ratio ($2,501 × .5769692 = $1,443 in quick assets less $ 505 in cash and cash equivalents = $938 in accounts and notes receivable). With that known, students can compute the inventory balance ($3,382 − 505 − 938 − 450 = $1,489). Finally, with current and total assets determined, the long-term assets can be found, leading to the missing balance in intangible assets.

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.

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Question 4

Accrued salaries and wages in a balance sheet represent salaries and wages that have been earned by employees but not yet paid.

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Question 5

Listed below are ten terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Prepaid expense

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Question 6

Which of the following is not a current liability account?

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Question 7

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

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Question 8

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Subsequent events

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Question 9

The acid-test ratio is also known as the:

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Question 10

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

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Question 11

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Summary of significant accounting policies

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Question 12

Listed below are ten terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Subsequent events

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Question 13

A company may compare the amount of receivables in the current year to the amount of receivables in the previous year to estimate a trend in the company's ability to collect cash from customers. This type of analysis is known as:

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Question 14

The balance sheets of Callaway Foods list current assets followed by long-term assets and current liabilities before long-term liabilities. If Callaway Foods prepared its financial statements according to International Financial Reporting Standards, what other approach might it take in preparing its balance sheet?

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Question 15

Listed below are four terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Horizontal analysis

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Question 16

Balance sheets prepared under IFRS often exclude a shareholders' equity section.

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Question 17

Using an example, discuss the techniques that analysts use to transform accounting numbers into more useful forms.

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Question 18

The balance sheet for Altoid Co. is shown below. Required: Compute the following financial statement ratios for 2018: -Altoid Co.'s debt to equity ratio. Round your answer to two decimal places.

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Question 19

Which of the following would be an amount computed using horizontal analysis?

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Question 20

Showing 1 - 20 of 168

Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement: Required: Compute the following for Bronco: -Current assets

When a company pays its bill from a plumber for previous services on account:

Accrued salaries and wages in a balance sheet represent salaries and wages that have been earned by employees but not yet paid.

Listed below are ten terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Prepaid expense

Which of the following is not a current liability account?

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

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Subsequent events

The acid-test ratio is also known as the:

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

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Summary of significant accounting policies

Listed below are ten terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Subsequent events

A company may compare the amount of receivables in the current year to the amount of receivables in the previous year to estimate a trend in the company's ability to collect cash from customers. This type of analysis is known as:

Listed below are four terms followed by a list of phrases that describe or characterize each of the terms. Match each phrase with the correct term. -Horizontal analysis

Balance sheets prepared under IFRS often exclude a shareholders' equity section.

Using an example, discuss the techniques that analysts use to transform accounting numbers into more useful forms.

The balance sheet for Altoid Co. is shown below. Required: Compute the following financial statement ratios for 2018: -Altoid Co.'s debt to equity ratio. Round your answer to two decimal places.

Which of the following would be an amount computed using horizontal analysis?

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Revenue Recognition

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Inventories: Additional Issues

Property, Plant, and Equipment and Intangible Assets: Acquisition

Property, Plant, and Equipment and Intangible Assets: Utilization and Disposition

Investments

Current Liabilities and Contingencies

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

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