1.Which of the following statements is incorrect?
A.A balance sheet reports assets, liabilities and equity at a point in time.
B.The exclusion of an asset from the business balance sheet because it is for private use is due to the going concern assumption.
C.The average period between the purchase of merchandise and the conversion of this merchandise back into cash is the operating cycle.
D.In order for a resource to be classified as an asset of the entity, the benefits must accrue to the entity.
2.A balance sheet is a statement that shows the resources controlled and the obligations owed by an entity:
A.in the previous financial year.
B.for the financial year.
C.for the accounting period.
D.at a point in time.
3.The balance sheet shows the position of the entity:
A.at a point in time.
B.when it is insolvent only.
C.when it is making profits.
D.for a specified period of time.
4.Which of the following best describes the purpose of the balance sheet?
A.To summarise assets and liabilities for the accounting period
B.To report the inflows and outflows of cash
C.To balance current period revenues with those of the previous period
D.To report assets, liabilities and owners’ equity as of a specific date
5.The most liquid type of asset is:
C.investment in listed shares.
6.Which of the following best represents examples of liquid assets?
A.Cash and office equipment
B.Cash and accounts receivable
C.Cash and inventory
D.Cash and prepaid assets
7.Which statement below is true about a company’s operating cycle?
A.It may not exceed one year.
B.It must be one year.
C.It may be longer than a year.
D.It is always longer than a year.
8.Non-current assets are best described as:
A.assets that extend benefits beyond the coming financial year or operating cycle.
B.tangible assets that extend benefits beyond the coming year or operating cycle, whichever is longer.
C.assets that are depreciated for a maximum of 40 years.
D.assets that provide economic benefits over the coming year.
9.Which of the following would not explain the difference between current and non-current assets?
A.The future benefit of current assets will generally be used up within the entity’s operating cycle.
B.An expenditure is classified as a non-current asset if it is considered to be material.
C.An asset is classified as non-current if it is intended to be used within the business for a considerable period of time.
D.The nature and intention of the business can help determine whether an expenditure should be classified as a non-current asset.
10.Gibson, Inc. a retailer, reports the following information:
Accounts Payable$600Accounts Receivable$5200
Retained Profits7800Inventory10 200
Buildings17 600Office Supplies1600
What is the most likely amount for the firm’s current assets?