Question

1. Which of the following statements about the balance sheet are true?

• A classified balance sheet to provide useful information about liquidity and long-term solvency.

  A classified balance sheet to provide useful information about liquidity and long-term solvency.

• Liquidity refers to an assessment of whether a company will be able to pay all its liabilities.

  Liquidity refers to an assessment of whether a company will be able to pay all its liabilities.

• Although many valuable resources are not recorded as assets in the balance sheet, these resources are reflected in the company’s book value.

  Although many valuable resources are not recorded as assets in the balance sheet, these resources are reflected in the company’s book value.

• The less financial flexibility, the more risk there is that an enterprise will fail.

2. Which of the following would be considered a long-term asset?

• Investments that the company intends to sell within the next three months.

• The 10-year note owed by the company to the bank.

• The company’s common stock.

• Machinery the company intends to use over the next seven years.

3. which of the following is a long-term liability?

• Property, plant and equipment that will be used in operations over 4 years.

• Bonds payable that are due in 5 years.

• A patent that gives exclusive rights over 7 years.

• Land that will be sold in 3 months.

4. The amount that the shareholders have invested into the company is called:

• Retained earnings.

• Accumulated other comprehensive income.

• Paid-in capital.

• Shareholders’ equity.

Answer 1

1) Option (A)

A classified balance sheet to provide useful information about liquidity and long-term solvency. Balance Sheet is the final extract of the company's position. It tells various useful information and also sets a basis for extracting other useful information by further calculations.

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2) Option (D)
Investments that the company intends to sell within the next three months	Short term Asset
The 10-year note owed by the company to the bank	Long Term Liability
The company’s common stock	Stockholders' Equity
Machinery the company intends to use over the next seven years	Long term Asset

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3) Option (B)
Property, plant and equipment that will be used in operations over 4 years	Long term Asset
Bonds payable that are due in 5 years	Long Term Liability
A patent that gives exclusive rights over 7 years	Long term Asset
Machinery the company intends to use over the next seven years	Long term Asset

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3) Option (D)

The amount that the shareholders invest in the company is called Stockholders' Equity