Chapters 15 and 16

As Hector was packing to return to State University after his summer vacation, he realized that he owned many valuable things such as a laptop computer, a stereo system, and a DVD player. An accountant would list all of these as Hector's:

• assets.

• liabilities.

• owners' equity.

• intangibles.

Keith will graduate from Southern State University this year. He has accumulated $18,000 in student loans during his four years at college. An accountant would classify the loans as:

• assets.

• liabilities.

• owners' equity.

• intangibles.

The balance sheet for Renuvation LLC shows assets totaling $107,000 and liabilities totaling $75,000. Which of the following statements is correct?

• Owners’ equity equals $182,000.

• Current assets are worth $32,000.

• Net income for the period is $32,000.

• Owners’ equity equals $32,000.

When reviewing the balance sheet for Preferred Pet Care, Inc., a mobile small animal care business, Julian noted the following information: Company assets totaling $3.5 million, and liabilities totaling $1.3 million. On paper, the net worth (owners’ equity) for this business = ____________.

• $2.2 million.

• $4.8 million.

• $3.5 million.

• $0.2 million.

Scott Drilling Contractors recently issued a corporate bond on which it expects to pay interest for the next twenty years. Scott would record this as a __________ on its balance sheet.

• declining balance asset

• retained earning

• long-term liability

• long-term expense

Meg Malloy is running an income statement on her QuickBooks computer accounting program. Which of the following accounts will be used to calculate gross profit?

• Revenues, net sales, depreciation, and operating expenses

• Revenues, general expenses

• Revenues, cost of goods sold, tax expenses, net income before taxes

• Revenues, cost of goods sold

At the time the Jepson Plumbing Supply prepared its financial statements, it had several customers who bought goods over the past three months on its "90 days same as cash" credit plan. These customers had not yet paid their bills, but they have good credit ratings and Jepson is confident that they will make their payments on time. The amount these credit customers owe would show up as part of the:

• current assets listed on Jepson's balance sheet.

• current liabilities listed on Jepson's balance sheet.

• a deferred cash flow on Jepson's statement of cash flows.

• unrealized revenue reported on Jepson's income statement.

McCartney Consulting Group is a management-consulting firm that provides its expertise to businesses that employ its services. Since it does not hold an inventory of goods or produce any goods itself:

• its revenue will equal its net income.

• its gross profit could be identical to its net revenue.

• it is unlikely to have any operating expenses.

• its balance sheet will not record any current assets.

Cindy is concerned because during the past four months her company has experienced difficulty in paying its bills on time. She knows if this continues, the firm will have difficulties in accomplishing its goals. Cindy is concerned with:

• asset disbursement.

• cash flow.

• profit and loss.

• inventory valuation.

Monica noted that she disbursed $6,347 in payments for operations in her travel agency and received $6,189 in cash receipts for services rendered. She had no cash receipts or disbursements from investments or financing activities. Thus, Monica had a:

• positive disbursement.

• negative cash flow.

• bad debt allowance.

• tax credit payment.