Question

If the balance sheet of a firm indicates that total assets exceed current liabilities plus shareholders' equity, then the firm must have:

		a. no retained earnings.
		b. long-term debt.
		c. no accumulated depreciation.
		d. current assets.
		e. None of the above

Corporations are referred to as public companies when their:

		a. shareholders have no tax liability.
		b. shares are held by the federal or state government.
		c. stock is publicly traded.
		d. products or services are available to the public.
		e. None of the above

Answer 1

1) Answer : b) long term debt

Reason : In a balance sheet, total assets tallies with total liabilities & shareholders equity.

Total liabilities includes current liabilities & long term debt, etc.

If total assets exceeeds current liabilites & shareholders equity then firm must have long term debt then only total assets will tally with total liabilites & shareholder equity.

Total assets = Total liabilites (Current liabilities & long term debt) + Shareholders equity.

So, there is no question arising of depriciation, current assets or no retained earnings.

2) Answer : c) stock is publicly traded.

Reason : Corporation referred to as public companies when their stock is publicly traded.

If shares are held by federal or state government then it is said to be governement company.

No tax liability on shareholders and products or services are available to public are not the criteria to classify any company.