Question

QUESTION 1

Prepaid Services is an example of

  

An asset created by an accrual.

An asset created by a deferral.

A liability created by a deferral.

A liability created by an accrual

QUESTION 2

The Debt to Equity Ratio relates to:

  

A more stringent ability to calculate liquidity

The payment of debt's principals.

The interest payments associated with debt

The ability to meet short-term obligations

QUESTION 3

Temporary accounts include:

  

Cash Inflows and Outflows to be displayed in the Statement of Cash Flows.

Revenues and expenses to be displayed in the Income Statement.

Assets, Liabilities, and Equity accounts to be displayed in the Balance Sheet.

Dividends and changes in stock to be displayed in the Statement of Shareholders' Equity.

Q4

Company X has the following balance sheet information:

Total Assets $1,000,000

Noncurrent Liabilities $150,000

Shareholders’ Equity $350,000

Current Ratio 0.80

What is Company X’s total current assets on its balance sheet?

  

$800,000

$400,000

$520,000

$440,000

Answer 1

QUESTION 1

Prepaid Services is an example of an asset created by accrual. Prepaid services and deferred expenses both comes under assets for a certain period of time. Prepaid services are treated as assets till it gets accrued usually 1 year. Deferred Expenses are treated as long term assets which usually be for more than 1 year.

Hence , An asset created by an accrual is the correct option

QUESTION 2

The Debt to Equity Ratio relates to:

A more stringent ability to calculate liquidity - The option is incorrect because current ratio measures the ability to calculate liquidity and not Debt to Equity ratio

The payment of debt's principals. - This option is true because, Debt to Equity ratio measures the leverage. So it is related to the payment of debt's principle

The interest payments associated with debt - Debt to equity is not assosciated with Interest payments

The ability to meet short-term obligations - Current ratio meaures the short term obligations.

Hence Option The payment of debt's principals is correct

QUESTION 3

All the ledger account  which are part of income statement are called Temporary accounts because at teh end of the period all these accounts are closed and transfered to Profit and loss account. These accounts are of Revenues and expenditures.

Hence option "Revenues and expenses to be displayed in the Income Statement" is correct

QUESTION 4

Given,

Total Assets $1,000,000

Noncurrent Liabilities $150,000

Shareholders’ Equity $350,000

Current Ratio 0.80

We know Tota Assets = Total LIabilities + Share Holders Equity

Total Assets = Current Liabilities + Non Current Liabilities + Share Holders Equity

$1,000,000 = Current LIabilities + $150,000 + $350,000

Current Liabilites = $1,000,000 - $150,000 - $350,000

Current Liabilites = $500,000

Current Ratio = Current Assets / Current Liabilities

0.80 = Current Assets / $500,000

Current Assets = $500,000 * 0.80

Current Assets = $400,000

Hence Option $400,000 is correct