Chapter 3

CHAPTER 3—BALANCE SHEET

MULTIPLE CHOICE

1. The balance sheet reports:

a. the assets, liabilities, gains, and losses for a period of time

b. the changes in assets, liabilities, and equity for a period of time

c. the assets, expenses, and liabilities as of a certain date

d. the probable future benefits, probable future sacrifices, and residual interest for a period of time

e. the financial condition of an accounting entity as of a particular date

ANS: E

2. Which of the following would not appear on a conventional balance sheet?

a. income taxes payable

b. funds from operations

c. cash surrender value of life insurance

d. appropriation for contingencies (restriction of retained earnings)

e. patents

ANS: B

3. At the beginning of the year, Execon Company had total assets of $200,000, total liabilities of $110,000, and shareholders' equity of $90,000. For the year, Execon Company earned net income of $75,000 and declared cash dividends of $30,000. At the end of the year, the company had total assets of $300,000 and its shareholders' equity was at $135,000. At the end of the year, Execon Corporation had total liabilities of:

a. $0

b. $45,000

c. $50,000

d. $165,000

e. none of the answers are correct

ANS: D

4. Ownership of debt instruments of the government and other companies that can be readily converted to cash are best reported as:

a. long-term investments

b. cash

c. marketable securities

d. intangibles

e. inventory of near-cash items

ANS: C

5. Tangible assets on the balance sheet should include:

a. equipment

b. taxes payable

c. trademarks

d. bonds payable

e. none of the answers are correct

ANS: A

6. The current asset section of the balance sheet should include:

a. land

b. trademarks

c. investment in C Company (for purposes of control)

d. dividends payable

e. work in process inventory

ANS: E

7. The current liability section of the balance sheet should include:

a. buildings

b. goodwill...