KA2e_SelfStudy_Ch02

KA2e_SelfStudy_Ch02 -...

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File: ch02, Chapter 2: A Further Look at Financial Statements Multiple Choice 1. In a classified balance sheet, assets are usually classified as: a) current assets; long-term assets; property, plant, and equipment; and intangible assets. b) current assets; long-term investments; property, plant, and equipment; and common stock. c) current assets; long-term investments; tangible assets; and intangible assets. d) current assets; long-term investments; property, plant, and equipment; and intangible assets. Ans: d Response A: The term “long-term assets” includes long-term investment, property, plant, and equipment and intangible assets. It does not make sense to include this term with the more specific classifications of long-term assets. Response B: The order of the first three asset classifications is correct, but common stock generally refers to the stock of the firm and is not an asset. Response C: While the term “tangible assets” is sometimes substituted for property, plant, and equipment, it is better to use the more common terminology, property, plant, and equipment. Response D: Correct! 2. Current assets are listed: a) by liquidity. b) by importance. c) by longevity. d) alphabetically. Ans: a Response A: Correct! Response B: Current assets should be listed in order of liquidity, or in order of how quickly they are expected to be converted into cash. Response C: Current assets should be listed in order of liquidity, or in order of how quickly they are expected to be converted into cash. Response D: Current assets should be listed in order of liquidity, or in order of how quickly they are expected to be converted into cash. 3. Which is an indicator of profitability?
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This note was uploaded on 04/22/2009 for the course BCOR 2000 taught by Professor Brush during the Spring '07 term at Colorado.

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KA2e_SelfStudy_Ch02 -...

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