The Balance Sheet Format F3

25 Questions | Total Attempts: 333

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Questions and Answers
  • 1. 
    Total equity is calculated by adding owner contributions and:
    • A. 

      Earnings

    • B. 

      Bankers

    • C. 

      Creditors

    • D. 

      Liabilities

  • 2. 
    Lonnie has just purchased 50 shares of $3 par value stock from JML Corporation. He paid a total of $275 for the shares. How much will JML recognize as “Additional paid-in capital” from the sale?
    • A. 

      $275

    • B. 

      $0

    • C. 

      $125

    • D. 

      $150

  • 3. 
    The ratio that is computed by taking total liabilities and dividing them by total assets is called the:
    • A. 

      Reinvested assets ratio

    • B. 

      Debt to equity ratio

    • C. 

      Quick ratio

    • D. 

      Debt ratio

  • 4. 
    The balance sheet is also known as:
    • A. 

      Statement of financial condition

    • B. 

      Statement of financial position

    • C. 

      Statement of cash flows

    • D. 

      Answers a and b are both correct.

  • 5. 
    The balance sheet format which places assets on the left side and liabilities and owners’ equity on the right is called the:
    • A. 

      Report form

    • B. 

      Correct form

    • C. 

      Bookkeeping form

    • D. 

      Account form

  • 6. 
    The balance sheet format that is the most popular is the:
    • A. 

      Report form

    • B. 

      Account form

    • C. 

      Investor form

    • D. 

      No one balance sheet form is more popular than another.

  • 7. 
    Which one of the following items is classified as a liability on the balance sheet?
    • A. 

      Cash

    • B. 

      Land

    • C. 

      Note payable

    • D. 

      Common stock

  • 8. 
    A bond that is sold without a pledge of collateral is known as a(n):
    • A. 

      Commercial bond

    • B. 

      Debenture bond

    • C. 

      Consumer bond

    • D. 

      Indenture bond

  • 9. 
    The balance sheet element identified as the residual interest in the assets of an entity that remains after deducting its liabilities is called:
    • A. 

      Equity

    • B. 

      Assets

    • C. 

      Cash flows

    • D. 

      Liabilities

  • 10. 
    A company invests in a new building and equipment to manufacture a new product. In the statement of cash flows, this activity would be considered a(n):
    • A. 

      Expansion activity

    • B. 

      Operating activity

    • C. 

      Investing activity

    • D. 

      Financing activity

  • 11. 
    The basic rules management uses to conduct the corporation’s business are called the:
    • A. 

      Articles of incorporation

    • B. 

      Annual report

    • C. 

      Corporate charter

    • D. 

      Corporate bylaws

  • 12. 
    Total stockholders’ equity is a combination of __________ and ___________.
    • A. 

      Retained earnings; reinvested earnings

    • B. 

      Common stock; preferred stock

    • C. 

      Contributed capital; retained earnings

    • D. 

      Common stock; treasury stock

  • 13. 
    You buy a used pickup truck for $10,000. You pay $3,500 in cash and borrow the rest of the money from a bank. Using the accounting equation, how much do you still owe for the truck?
    • A. 

      $3,500

    • B. 

      $6,500

    • C. 

      $0

    • D. 

      $10,000

  • 14. 
    When deciding whether to purchase stock, the economic decision-making question that can be answered with certainty is:
    • A. 

      How much will I be paid?

    • B. 

      When will I be paid?

    • C. 

      Will I be paid?

    • D. 

      None of these questions can be answered with certainty.

  • 15. 
    In the statement of cash flows, activities that are associated with a company’s borrowing of funds and amounts received from the sale of its own stock are called:
    • A. 

      Financing activities

    • B. 

      Operating activities

    • C. 

      Investing activities

    • D. 

      Continuing activities

  • 16. 
    The balance sheet represents a “snapshot” of the assets, liabilities, and owners’ equity of a company for:
    • A. 

      One month

    • B. 

      One day

    • C. 

      One year

    • D. 

      Any time period of the accountant’s choosing

  • 17. 
    A balance sheet must follow the accounting equation to stay in balance. There are two ways to present a balance sheet. When a balance sheet is shown in a vertical format, it is in the:
    • A. 

      Report form

    • B. 

      Correct form

    • C. 

      Investor form

    • D. 

      Account form

  • 18. 
    The rate of interest printed on a bond that is used to calculate the bond’s interest payments is called the:
    • A. 

      Contract rate

    • B. 

      Coupon rate

    • C. 

      Effective rate

    • D. 

      Stated rate

  • 19. 
    The cost of borrowing money is knows as:
    • A. 

      Principal

    • B. 

      Interest

    • C. 

      Time

    • D. 

      Rate

  • 20. 
    Which right or benefit below is not a characteristic of preferred stock?
    • A. 

      Voting rights

    • B. 

      Preferred stockholders are not owners of the corporation

    • C. 

      Preferred stockholders receive their dividend before common stockholders

    • D. 

      If the corporation goes out of business, preferred stockholders receive their distribution of assets before common stockholders

  • 21. 
    Par value:
    • A. 

      Has a great deal of meaning for common stockholders since dividends are often based on par value

    • B. 

      Is a requirement of any newly formed corporation issuing stock

    • C. 

      Is meaningless when issuing preferred stock because legally such stock can never have a par value

    • D. 

      May be important for preferred stock because dividends are often stated as a percentage of par value

  • 22. 
    XYZ Industries has just declared a dividend on preferred stock. The stock has a par value of $100 and a stated dividend rate of 7%. If the company has 4,000 shares outstanding, the dividend per share will be:
    • A. 

      $70

    • B. 

      $2,800

    • C. 

      $100

    • D. 

      $7

  • 23. 
    A balance sheet that has only one equity account that contains the owner's name in the title indicates that this firm is most likely a:
    • A. 

      Sole proprietorship

    • B. 

      Limited partnership

    • C. 

      Corporation

    • D. 

      Partnership

  • 24. 
    Ratios cover four main areas of financial concern: profitability, efficiency, liquidity, and solvency. Ratios that look at how a company is financed and its prospects for making payments to creditors and owners are:
    • A. 

      Efficiency ratios

    • B. 

      Liquidity ratios

    • C. 

      Profitability ratios

    • D. 

      Solvency ratios

  • 25. 
    The ownership interest in a company is known as:
    • A. 

      Net assets

    • B. 

      Net worth

    • C. 

      Equity

    • D. 

      All these answers are correct.

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