1. Which of the following statements about the balance sheet is incorrect?
A.It reports the assets, liabilities, and stockholders' equity of a company for a period of time.
B.It is sometimes referred to as the statement of financial position.
C.It provides information about the nature and amounts of investments in resources, obligations to creditors, and the owners' equity.
D.It helps in predicting the amounts, timing, and uncertainty of future cash flows.

2. Major limitations of the balance sheet include all of the following except:
A.Most assets and liabilities are stated at historical cost.
B.Judgements and estimates are used in determining many of the items reported.
C.It necessarily omits many items that are of financial value but cannot be recorded objectively.
D.Only amounts known with certainty are reported.

3. Current assets are presented in the balance sheet in order of:
A.Dollar amounts.
D.The alphabet.

4. Which of the following investments are reported as current assets?
A.Investments in corporate shares.
B.Interest bearing securities.
C.Investments that provide a low-risk return.
D.Those that management intends to liquidate in the near future.

5. Current liabilities include all of the following except:
A.Accrued warranty costs.
B.Advances received from customers.
C.Current portion of long-term debt.
D.All of the options are current liabilities.

6. All of the following are shareholders' equity sections except:
A.Contributed surplus.
B.Capital shares.
C.Retained earnings.
D.Treasury shares.

7. Subsequent events that must be reported in notes to the financial statements include those:
A.That have an impact on the entity's economic situation.
B.That occurred before the balance sheet date.
C.That provide evidence of a situation that existed at the balance sheet date.
D.That were imposed by new laws or regulations affecting the entity.

8. Which of the following is not a type of information that is supplemental to amounts presented in the balance sheet?
A.Accounting policies.
B.Balance sheet format.
D.Contractual situations.

9. Companies are not required to disclose information about:
A.Inventory cost flow methods.
B.Depreciation methods.
C.Identity of major shareholders.
D.The use of estimates.

10. If additional explanations cannot be conveniently shown parenthetically, the information should be disclosed by:
A.Cross reference.
C.Supporting schedules.
D.A contra account.

11. The primary purpose of a statement of cash flows is to report the:
A.Cash effects of operations during a period.
B.Net increase or decrease in cash during the period.
C.Investing and financing transactions.
D.Relevant information about the cash receipts and cash payments during a period.

12. Activities that involve the cash effects of transactions that enter into the determination of net income are classified as:
A.Operating activities.
B.Investing activities.
C.Financing activities.
D.Noncash activities.

13. The last step in preparing the statement of cash flows is to:
A.Determine the cash provided by operations.
B.Determine the cash provided by or used in investing and financing activities.
C.Determine the change in cash during the period.
D.Reconcile the change in cash with the beginning and the ending cash balances.

14. The cash debt coverage ratio is calculated by dividing net cash provided by operating activities by average:
A.Current liabilities.
B.Total assets.
C.Total liabilities.
D.Total long-term liabilities.

15. Free cash flow is calculated as net cash provided by operating activities less:
A.Capital expenditures.
B.Capital expenditures and dividends.
C.Capital expenditures and interest.

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