Question 1

The investment classification on the statement of financial position normally includes investments that are intended to be held for a short period of time (less than one year).

Accepted Answer

The investment classification on the statement of financial position normally includes investments that are intended to be held for a long period of time (more than one year), not for a short period of time. Short-term investments are usually classified as current assets.

Question 2

Cash and office supplies are both classified as current assets.

Accepted Answer

Both cash and office supplies are assets that are expected to be used or sold within a year, thus they are classified as current assets on a company's balance sheet.

Question 3

The main difference between intangible assets and property, plant, and equipment is the length of the asset's life.

Accepted Answer

False

Question 4

Inventories and prepaid expenses are classified as long-term investments.

Accepted Answer

Inventories and prepaid expenses are not classified as long-term investments. They are classified as current assets on the balance sheet. Long-term investments include investments in stocks, bonds, real estate, and other securities that are held for more than one year.

Question 5

Identify and calculate ratios for analyzing a company's liquidity, solvency, and profitability.

Accepted Answer

The answer of Identify and calculate ratios for analyzing a...

Question 6

All long-lived assets including land have estimated useful lives over which they are expected to generate revenue.

Accepted Answer

Land is considered to have an indefinite useful life and is not depreciated, unlike other long-lived assets which have a finite useful life.

Question 7

Describe the framework for the preparation and presentation of financial statements.

Accepted Answer

The answer of Describe the framework for the preparation and...

Question 8

Mortgages and pension liabilities are examples of non-current liabilities.

Accepted Answer

Mortgages and pension liabilities are both long-term liabilities that are not due for payment within the current fiscal year. As such, they are classified as non-current liabilities on a company's balance sheet.

Question 9

All long-lived assets are depreciated over their estimated useful lives.

Accepted Answer

The answer of All long-lived assets are depreciated over their...

Question 10

Shareholders' equity consists of two parts: common and preferred shares.

Accepted Answer

The answer of Shareholders' equity consists of two parts: common...

Question 11

Intracompany comparisons are based on comparisons with competitors in the same industry.

Accepted Answer

Intracompany comparisons are based on comparing a company's financial performance with its own performance over time, not with competitors in the same industry. Intercompany comparisons involve comparing a company's financial performance with competitors in the same industry.

Question 12

Identify the sections of a classified statement of financial position.

Accepted Answer

The answer of Identify the sections of a classified statement...

Question 13

Long-term investments appear in the property, plant, and equipment section of the statement of financial position.

Accepted Answer

Long-term investments are typically listed in a separate section of the statement of financial position (balance sheet) from property, plant, and equipment, as they represent different types of assets.

Question 14

A liability is normally classified as a current liability if it is to be paid within the coming year.

Accepted Answer

Current liabilities are those liabilities that are expected to be paid within the next year or operating cycle, whichever is longer.

Question 15

Shareholders' equity is divided into at least two parts: share capital and retained earnings.

Accepted Answer

Shareholders' equity is indeed divided into these two parts. Share capital refers to the amount of money investors have contributed to the company through the purchase of shares, while retained earnings are the company's net profits that are not distributed as dividends but are instead reinvested in the business.

Question 16

The statement of financial position is normally presented as follows, when ordered in order of liquidity: Current assets, current liabilities, non-current assets, non-current liabilities, and shareholders' equity.

Accepted Answer

The answer of The statement of financial position is normally...

Question 17

The statement of financial position is normally presented as follows, when ordered in order of reverse liquidity: Non-current assets, current assets, shareholders' equity, non-current liabilities, and current liabilities.

Accepted Answer

This is the correct order in which the statement of financial position is normally presented. Non-current assets are listed first, followed by current assets, shareholders' equity, non-current liabilities, and finally current liabilities. The order is based on the concept of liquidity, with the most liquid items listed last.

Question 18

Listing assets and liabilities in reverse order of liquidity is not permitted in Canada.

Accepted Answer

In Canada, the standard accounting practice is to list assets and liabilities in order of liquidity, with the most liquid items being listed first.

Question 19

Special rights and privileges that provide a future economic benefit to the company are classified as intangible assets.

Accepted Answer

This is a correct definition of intangible assets. Examples of such assets include patents, trademarks, copyrights, and goodwill.

Question 20

Calculating financial ratios can give clues to underlying conditions that may not be noticed by examining each financial statement item separately.

Accepted Answer

Financial ratios provide a way to analyze the relationship between different financial statement items, highlighting trends, strengths, and weaknesses of a company. Examining each financial statement item separately may not reveal as much information as analyzing the ratios.

Quiz 2: A Further Look at Financial Statements