Chapter 4, The Balance Sheet: Classifications and Concepts Video Solutions, Financial Statements Demystified

Problem 1

A company has $$\$ 300,000$$ of liabilities and total assets of $$\$ 700,000$$. What is the dollar amount of its owner equity?
a. $$\$ 300,000$$
b. $$\$ 400,000$$
c. $$\$ 700,000$$
d. $$\$ 1,000,000$$

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Problem 2

Current assets include cash and other assets, such as:
a. Receivables that will be collected in cash
b. Merchandise inventory that will be sold
c. Supplies on hand that will be used
d. All of the above if each occurs within a year or within the operating cycle of the business, whichever is longer
e. None of the above

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08:35

Problem 3

Current liabilities include:
a. Unearned revenues
b. Payroll tax liabilities
c. Accounts payable to suppliers
d. Interest payable
e. All of the above

Puneet Prajapati

Numerade Educator

Problem 4

Which of the following is true?
a. Current assets are presented in the balance sheet in order of liquidity.
b. Working capital is the dollar amount of excess of current assets over current liabilities.
c. The ratio of current assets to current liabilities can be used to evaluate a company's liquidity.
d. A company is liquid if it is able to meet its current obligations as they become due.
e. All of the above

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00:56

Problem 5

Investments in marketable securities such as stocks and bonds can be classified as either current assets or long-term investments, depending on the intent and expected holding period.
a. True
b. False

Oluwadamilola Ameobi

Numerade Educator

Problem 6

Equipment purchased at an original cost of $\$ 7,000$ has a book value of $\$ 3,200$. A total of $\$ 3,800$ depreciation expense has been taken on the equipment in the past.
a. True
b. False

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Problem 7

Which of the following pertaining to intangible assets is true?
a. Patents, copyrights, and trademarks represent legal rights conveyed to the holder for a specific period of time.
b. Contractual arrangements such as franchise and licensing agreements are classified as intangible assets.
c. Goodwill is the amount paid to buy another company in excess of the fair value of the assets that can be specifically identified.
d. All of the above are true.
e. None of the above are true.

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Problem 8

Capital is the term used to describe the equity of an individual owner if the company is a sole proprietorship or partnership.
a. True
b. False

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02:01

Problem 9

The amount of profit a company distributes to its owner(s) is referred to as:
a. Dividends if the company is a corporation
b. Withdrawals if the company is a sole proprietorship or partnership
c. Both of the above are true.
d. Neither of the above is true.

Oluwadamilola Ameobi

Numerade Educator

Problem 10

At the beginning of the year, a corporation had $$\$ 300,000$$ of common stock and $$\$ 700,000$$ of retained earnings. During the year, the corporation issued $$\$ 200,000$$ of additional common stock, earned net income of $$\$ 500,000$$, and paid cash dividends of $$\$ 100,000$$. Total stockholders' equity at year end is:
a. $$\$ 1,200,000$$
b. $$\$ 1,500,000$$
c. $$\$ 1,700,000$$
d. $$\$ 1,600,000$$
e. Some other amount

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