Sanicomodule 2
Sanicomodule 2
Problem 1
Indicate the proper classification or presentation of the items below. Use the following classifications:
A. Current Assets
B. Noncurrent Assets
C. Current Liabilities
D. Noncurrent Liabilities
E. Equity
Items
B 2. Investment in associates
A 4. Sinking fund for the payment of bond payable due next year
B 6. Leasehold improvement
E 7. Reserves
E 8. Share premium
B 10. Trademark
Problem 4
True or False. Write True if the statement is correct otherwise write false.
False 1.Liquidity refers to the ability of an enterprise to pay its debts as they mature.
True 2.The balance sheet omits many items that are of financial value to the business but cannot be
recorded objectively.
True 3.Financial flexibility measures the ability of an enterprise to take effective actions to alter the
financial statements.
True 5.An asset which is expected to be converted into cash, sold, or consumed within one year of the
False 6.Land held for speculation is reported in the property, plant, and equipment section of the
balance sheet.
True 7.The account form and the report form of the balance sheet are both acceptable under GAAP.
False 8.Because of the historical cost principle, fair values may not be disclosed in the balance sheet.
False 9.Companies have the option of disclosing information about the nature of their operations and
the use of estimates in preparing financial statements.
True 10.Companies may use parenthetical explanations, notes, cross references, and supporting
schedules to disclose pertinent information.
Problem 5
d. All of these
2. The balance sheet is useful for analyzing all of the following except
a. liquidity.
b. solvency.
c. profitability.
d. financial flexibility.
5. A limitation of the balance sheet that is not also a limitation of the income statement is
b. omitted items
6. The balance sheet contributes to financial reporting by providing a basis for all of the
following except
7. One criticism not normally aimed at a balance sheet prepared using current accounting and
reporting standards is
8. The amount of time that is expected to elapse until an asset is realized or otherwise converted
a. solvency.
b. financial flexibility.
c. liquidity.
d. exchangeability.
d. none of these.
11. The basis for classifying assets as current or noncurrent is conversion to cash within
12. The basis for classifying assets as current or noncurrent is the period of time normally required
13. The current assets section of the balance sheet should include
a. machinery.
b. patents.
c. goodwill.
d. inventory.
a. Cash surrender value of a life insurance policy of which the company is the beneficiary.
b. Investment in equity securities for the purpose of controlling the issuing company.
c. Cash designated for the purchase of tangible fixed assets.
15. Which of the following should not be considered as a current asset in the balance sheet?
a. Installment notes receivable due over 18 months in accordance with normal trade practice.
b. Prepaid taxes which cover assessments of the following operating cycle of the business.
c. Equity or debt securities purchased with cash available for current operations.
d. The cash surrender value of a life insurance policy carried by a corporation, the
16. Equity or debt securities held to finance future construction of additional plants should be
a. current assets.
c. intangible assets.
d. long-term investment
a. the value of the portion pledged should be subtracted from the debt.
c. the fact should be disclosed but the amount of current assets should not be affected.
d. the cost of the pledged inventories should be transferred from current assets to noncurrent
assets.
b. Franchise
d. A sinking fund
b. 2
c. 3
d. 1 and 2
a. Unearned revenue
d. none of these.
b. goodwill.
c. goods in process.
d. temporary investments
d. all of these.
c. Long-term liabilities that mature within the operating cycle and will be paid from a sinking
fund
d. None of these
a. current asset.
b. investment.
c. other asset.
d. All of these
27. Which of the following would be classified in a different major section of a balance sheet from
the others?
a. Capital stock
28. The stockholders' equity section is usually divided into what three parts?
a. Current assets
b. Long-term investments
d. Deferred charges
c. Patents
d. Accumulated depreciation
a. P0.
b. exactly P60,000.
d. exactly P95,000.
Trademarks 65,000
a. P65,000.
b. P75,000.
c. P265,000.
d. P275,000.
33. Houghton Company has the following items: common stock, P720,000; treasury stock,
P85,000; deferred taxes, P100,000 and retained earnings, P313,000. What total amount should
a. P848,000.
b. P948,000.
c. P1,048,000.
d. P1,118,000.
a. exactly P95,000.
b. exactly P107,000.
c. exactly P142,000.
Trademarks 90,000
a. P90,000.
b. P105,000.
c. P370,000.
d. P385,000.
36. Olmsted Company has the following items: common stock, P720,000; treasury stock,
P85,000; deferred taxes, P100,000 and retained earnings, P363,000. What total amount should
a. P898,000.
b. P998,000.
c. P1,098,000.
d. P1,198,000.
a. P 504.
b. P 560.
c. P1,120.
d. P1,624.
a. P1,890.
b. P1,998.
c. P3,132.
d. P3,186.
39. Stine Corp.'s trial balance reflected the following account balances at December 31, 2020:
Cash 11,000
Inventory 30,000
Equipment 25,000
Patent 4,000
In Stine's December 31, 2010 balance sheet, the current assets total is
a. P90,000.
b. P82,000.
c. P77,000.
d. P73,000.
40. On January 4, 2020, Kiley Co. leased a building to Dodd Corp. for a ten-year term at an annual
rental of P75,000. At inception of the lease, Dodd received P300,000 covering the first two
years' rent of P150,000 and a security deposit of P150,000. This deposit will not be returned
to Dodd upon expiration of the lease but will be applied to payment of rent for the last two
years of the lease. What portion of the P300,000 should be shown as a current and long-term
a. P0 P300,000
b. P75,000 P150,000
c. P150,000 P150,000
d. P150,000 P75,000