Reports a company's financial position at a point in time
Balance sheet
Cash or assets that will be converted into cash or consumed withing 12 months, or the operating cycle, whichever is longer
Current assets
Balance of net receivables represents
amount expected to be collected
Salaries and wages that have been earned by employees but not yet paid on the balance sheet are..
Accrued Salaries and wages
Criteria for determining which items comprise cash equivalents often is disclosed where?
The summary of significant accounting policies
Payment terms, interest rates, and other details of long-term liabilities are usually reported where?
Disclosure Notes
Compensation of top executives is disclosed in the...
Proxy Statement
A payment on account has no effect on working capital but will increase the ________ if it is already greater than 1.0
Current Ratio
ABC Company classifies a six-month prepaid insurance policy as a current asset. Its rationale is based on:
The knowledge the prepaid account will be used within a year of the issued statement
ABC Winery requires two months to make wine, two years to age it, one month to bottle it, two months to sell it,
and one month to collect the receivable. Its operating cycle is how many months?
Thirty Months (2 + 24 + 1 + 2 + 1)
The principal concern with accounting for related-party transactions is:
Difference between economic substance and legal form
The final paragraph of the audit report provides what information?
Provides the auditor's opinion on the effectiveness of internal control
An exception that is so serious that even a qualified opinion is not justified would result in what kind of opinion
An adverse opinion
Liquidity refers to what
The readiness of an asset to be converted to cash
What is the working capital formula?
Working Capital = Current assets minus current liabilities
Assume a company's liquidity and financing ratios all are less than 1.0 before it purchases inventory on credit.
When it makes the purchase does the quick ratio (Acid test ratio) increase or decrease?
Decrease, quick assets are not increased, but liabilities are.
. ABC Company is preparing its annual report for the current fiscal year. The company's controller has asked for your help in determining how best to disclose information about the following items:
1. A subsequent event.
2. Inventory costing method.
3. Composition of accrued liabilities.
4. Useful lives of depreciable assets.
5. Information on long-term leases.
6. Allowance for uncollectible accounts.
7. Revenue recognition policy.
8. Pension plans.
Required: Indicate whether the above items should be disclosed (a) in the summary of significant accounting
policies note, (b) in a separate disclosure note, or (c) on the face of the balance sheet
1. B) A seperate disclosure Note
2. A) summary of accounting policies
3. C) face of the balance sheet
4. A)
5. B)
6. C)
7. A)
8. B)
The balance sheets of ABC Company list current assets followed by noncurrent assets and current liabilities before long-term liabilities. If allaway Foods prepared its financial statements according to International Financial Reporting Standards, what other approach might it take in preparing its balance sheet?
They basically flip everything on the GAAP balance sheet upside down.