Question

1)Available-for-sale securities are reported on the balance sheet

A) In the Investments classification at their historic cost

B) In the Current Assets classification at their market value

C) In the Investments classification at their market value

D) In the Stockholders’ Equity section at their market value.

2) Using the indirect method (statement of cash flows), a decrease in inventory would:

A) be subtracted from net income

B) be added to net income

C) have no adjustment made to net income

D) be added to the investing section of the statement of cash flows

3) The more formal name for a balance sheet is:

A) statement of net worth

B) statement of financial position

C) statement of stockholders' equity

D) statement of financial operations

Answer 1

1)Answer C

Debt and equity investments that are not classified as trading securities or held‐to‐maturity securities are calledavailable‐for‐sale securities. Whereas trading securities are short‐term, available‐for‐sale securities may be classified as either short‐term or long‐term assets based on management's intention of when to sell the securities. Available‐for‐sale securities are also valued at fair market value. Any resulting gain or loss is recorded to an unrealized gain and loss account that is reported as a separate line item in the stockholders' equity section of the balance sheet

2)Answer B

According to indirect method any decrease in the assets in an accounting year should be added to net income

3)Answer B

The balance sheet is also referred to as the statement of financial position or the statement of financial condition

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