Christina Jud

HPA 14

1. Which of the following statements about the organization of the balance

sheet is(are) most correct? NAME:

a. The balance sheet has upper and lower (or left and right) sections.

b. Assets are divided into current and long-term categories.

c. Assets are divided into equity and semi-equity categories.

d. Answers (a) and (b) are correct.

e. Answers (a) and (c) are correct.

2. Like the income statement, the balance sheet reports the status of an
organization over some period.

a. True

b. False

3. Which of the following equations best describes the accounting

identity?

a. Long-term assets = Short-term assets + Equity.

b. Assets = Liabilities + Equity.

c. Total claims = Liabilities + Equity.

d. Short-term assets = Cash + Receivables.

e. Long-term liabilities = Notes + Bonds.

4. Which of the following statements about the balance sheet is most

correct?

a. The lower (right-hand) section reports cash and other assets.

b. The balance sheet reports on a business's operations.

c. The asset side of the balance sheet is listed in decreasing order of

maturity (i.e., longer maturity assets are listed first).

d. The upper (left-hand) section reports liabilities and equity.

e. None of the above statements is correct.

5. Assume that the value of diagnostic equipment suddenly falls because of

technological obsolescence. How is the balance sheet adjusted to preserve
the accounting identity?

a. Short-term liabilities are reduced.

b. Long-term liabilities are reduced.

c. Equity is reduced.

d. Inventories are reduced.

e. Cash is reduced.

6. Which of the following statements concerning accumulated depreciation

is most correct?

a. Accumulated depreciation is an income statement item.

b. There is no relationship between depreciation expense on the income

statement and accumulated depreciation on the balance sheet.

c. Net fixed assets is equal to gross fixed assets plus accumulated

depreciation.

d. Accumulated depreciation appears on the balance sheet under the

category "other assets."

e. None of the above statements is correct.

7. Which of the following statements concerning the statement of cash

flows is most correct?

a. Like the balance sheet, the statement of cash flows is as of a single

point in time.

b. The statement of cash flows uses information from both the income
statement and the balance sheet.

c. The statement of cash flows has five major sections.

d. The most important line on the statement of cash flows is the "bottom
line," the net increase (decrease) in cash.

e. None of the above statements is correct.

8. Assume that a business's balance sheet reports total assets of $500,000
and total liabilities of $300,000. Now assume that $20,000 of net fixed
assets (net plant and equipment) are written off due to technological
obsolescence. All else the same, what is the total equity of the business
after the write-off?

a. $200,000

b. $190,000

c. $180,000

d. $170,000

e. The information provided is insufficient to answer this question.

9. Consider the following balance sheet:

Cash $70,000

Accounts receivable $30,000

Inventories $50,000

Net fixed assets $350,000

Total assets $500,000

Accounts payable $30,000

Long-term debt $20,000

Common stock $200,000

Retained earnings $250,000

Total liabilities and equity $500,000

Which of the following statements is most correct?

a. The business is not-for-profit.

b. The business, in the aggregate over time, has been profitable.

c. The business is probably using too much debt financing.

d. The business has $450,000 in its equity accounts (common stock and
retained earnings); thus, it has this much money available to spend on new
facilities.

e. The business has a short-term bank loan outstanding.

10. Consider the following balance sheet:

Cash $70,000

Accounts receivable $30,000

Inventories $50,000

Net fixed assets $350,000

Total assets $500,000

Accounts payable $30,000

Long-term debt $20,000

Common stock $200,000

Retained earnings $250,000

Total liabilities and equity $500,000

Assume that the business uses $10,000 of its cash to pay for supplies that
were ordered on credit terms and have already been received and booked
(recorded on the balance sheet). Which of the following statements
reflects the resulting balance sheet change?

a. There is a change to the left-hand side only.

b. There is a change to the right-hand side only.

c. The cash account decreases by $10,000, and the retained earnings

account decreases by $10,000.

d. The cash account decreases by $10,000, and the accounts payable account
decreases by $10,000.

e. The cash account decreases by $10,000, and the supplies account

increases by $10,000.
11. Consider the following balance sheet:

Cash $70,000

Accounts receivable $30,000

Inventories $50,000

Net fixed assets $350,000

Total assets $500,000

Accounts payable $30,000

Long-term debt $20,000

Common stock $200,000

Retained earnings $250,000

Total liabilities and equity $500,000

Assume that the business uses $30,000 of its cash to pay salaries. Which
of the following statements reflects the resulting balance sheet change?

a. There is a change to the left-hand side only.

b. There is a change to the right-hand side only.

c. The cash account decreases by $30,000, and the retained earnings

account is reduced by $30,000.

d. The cash account decreases by $30,000, and the long-term debt account
is reduced by $30,000.

e. The company does not have the ability to pay $30,000 in salaries.

12. Fund accounting is used by investor-owned (for-profit) businesses to

differentiate between operating funds and retirement funds.

a. True

b. False

13. Carlisle Clinic, a not-for-profit organization, reported an equity

balance of $1 million on its December 2012 balance sheet. Assuming
Carlisle Clinic reported net income of $200,000 for the year that ended
December 31, 2012, and had no other adjustments to equity during 2012,
what was Carlisle Clinic's equity balance as of December 31, 2011?

a. $800,000

b. $1.2 million

c. $200,000

d. $1 million

e. Answer cannot be determined on the basis of the information provided

14. Which of the following statements about equity is most correct?

a. Equity represents the amount of cash available to the organization.

b. Equity is the residual claim against assets after all liabilities have
been paid off.

c. Equity claims are paid before liability claims if a healthcare

organization is liquidated.

d. Equity always must be positive.

e. The balance of an organization's equity as of a given date is shown on

the organization's income statement.

15. Which of the following would most likely appear as an asset on the
balance sheet of a healthcare organization?

a. Salaries owed to employees, but not paid as of the balance sheet date

b. Equipment purchased during the accounting period to be used over the

next five years

c. The outstanding balance on a loan taken by the healthcare organization

d. The value of investments in stocks and bonds owned by the healthcare

organization

e. Answers (b) and (d)

16. Which of the following would most likely appear as a liability on the
balance sheet of a healthcare organization?

a. Interest payments made by the healthcare organization on an outstanding

loan
b. The outstanding balance on a loan taken by the healthcare organization

c. Salaries owed to employees but not paid as of the balance sheet date

d. The value of investments in stocks and bonds owned by the healthcare

organization

e. Answers (b) and (c)