Question

1. Which of the following statements is correct?

a.A current ratio of 1.60 means the company's current assets are probably not sufficient to pay its current liabilities.

b.The separate entity assumption requires that the financial activities of the owners of a company be reported on the company's balance sheet.

c.The cost principle states that recording activities at cost will result in the balance sheet representing the true value of the company.

d.A transaction is recorded if it has a measurable financial effect on the assets, liabilities or stockholders' equity of a business.

2.Which of the following statements about the balance sheet is correct?

a.A classified balance sheet is one that contains privileged information.

b.Current liabilities are debts and other obligations that will be paid or fulfilled within 12 months of the balance sheet date.c.

c.All companies use the chart of account names defined by the Financial Accounting Standards Board (FASB).

d.A balance sheet is prepared for a period of time.

3.What does the current ratio measure?

a.The relative proportion of current versus noncurrent assets

b.Whether current assets are sufficient to pay current liabilities

c.The speed which current assets can be converted to cash

d.Whether cash is sufficient to pay current liabilities

4.The basic accounting equation may be expanded to include the income statement effects of operating activities. Which of the statements below is correct regarding the expanded accounting equation?

a.Expenses are increased by credits and revenues are increased by debits.

b.Net Income increases the Common Stock account.

c.Expenses are increased by debits and revenues are increased by credits.

d.Retained Earnings is reduced by net income.

Answer 1

1. d) A transaction is recorded if it has a measurable financial effect on the assets, liabilities or stockholders' equity of a business. is true statement

Explanation Because Transaction means an event and activity which has direct and mneasurable financial effect on asset , liabilities or equity. Transaction are the only activities which are entered in financial statement.

2. (b) Current liabilities are debts and other obligations that will be paid or fulfilled within 12 months of the balance sheet date is correct statement.

Debt and other obligation that will be paid or fulfillfilled in more than than 12 month would be classified as Non-Current Liabilities and if it would be settled wih in 12 month wiuld be classified as Current Liabilities,

3. .Whether current assets are sufficient to pay current liabilities is correct statment.

Explanation:-

Current Ration calculate by dividing Current Liabilities from Current Asset Which denote that how much time Current Asset coverage for Current Liabilities.

4. c.Expenses are increased by debits and revenues are increased by credits. is correct statement.