Question 1

Liquidity refers to the ability of an enterprise to pay its debts as they mature.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a required supplemental disclosure for the statement of financial position?

Accepted Answer

A) Contingencies 
B) Financial forecasts 
C) Accounting policies 
D) Contractual situations 
A) Contingencies 
B) Financial forecasts 
C) Accounting policies 
D) Contractual situations

Question 3

Treasury shares should be reported as a(n)

Accepted Answer

A) current asset. 
B) investment. 
C) other asset. 
D) reduction of shareholders' equity. 
A) current asset. 
B) investment. 
C) other asset. 
D) reduction of shareholders' equity.

Question 4

Significant accounting policies may not be

Accepted Answer

A) selected on the basis of judgment. 
B) selected from existing acceptable alternatives. 
C) unusual or innovative in application. 
D) omitted from financial-statement disclosure. 
A) selected on the basis of judgment. 
B) selected from existing acceptable alternatives. 
C) unusual or innovative in application. 
D) omitted from financial-statement disclosure.

Question 5

Companies have the option of disclosing information about the nature of their operations and the use of estimates in preparing financial statements.

Accepted Answer

A) True 
 B)False

Question 6

Companies frequently describe the terms of all long-term liability agreements in notes to the financial statements.

Accepted Answer

A) True 
 B)False

Question 7

Caroline, Inc.hired a new controller in late 2011.The controller has not prepared financial statements using IFRS before and needs your assistance.In compiling a complete set of financial statements under IFRS, which of the following components must be included?

Accepted Answer

A) A statement of financial position at the end of the period. 
B) Notes, including a summary of significant accounting policies. 
C) A statement of comprehensive income for the period. 
D) All of the choices are correct. 
A) A statement of financial position at the end of the period. 
B) Notes, including a summary of significant accounting policies. 
C) A statement of comprehensive income for the period. 
D) All of the choices are correct.

Question 8

Working capital is

Accepted Answer

A) capital which has been reinvested in the business. 
B) unappropriated retained earnings. 
C) cash and receivables less current liabilities. 
D) none of these. 
A) capital which has been reinvested in the business. 
B) unappropriated retained earnings. 
C) cash and receivables less current liabilities. 
D) none of these.

Question 9

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?

Accepted Answer

A) Cash purchases of equipment. 
B) Cash purchases of bonds issued by another company. 
C) Cash received as repayment for funds loaned. 
D) Cash purchase of treasury stock. 
A) Cash purchases of equipment. 
B) Cash purchases of bonds issued by another company. 
C) Cash received as repayment for funds loaned. 
D) Cash purchase of treasury stock.

Question 10

Collection of a loan is reported as an investing activity in the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 11

Accounting policies disclosed in the notes to the financial statements typically include all of the following except

Accepted Answer

A) the cost flow assumption used 
B) the depreciation methods used 
C) significant estimates made 
D) significant inventory purchasing policies 
A) the cost flow assumption used 
B) the depreciation methods used 
C) significant estimates made 
D) significant inventory purchasing policies

Question 12

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

Accepted Answer

A) operating activities. 
B) borrowing activities. 
C) lending activities. 
D) financing activities. 
A) operating activities. 
B) borrowing activities. 
C) lending activities. 
D) financing activities.

Question 13

Under IFRS an adjunct account on the statement of financial position increases an asset, liability, or equity account.

Accepted Answer

A) True 
 B)False

Question 14

Rosalie Corporation is located in London but does business throughout Europe.The company builds and sells equipment used in manufacturing pharmaceuticals.On December 31, 2011, Rosalie has trading securities valued at £42,000; goodwill valued at £300,000; prepaid insurance valued at £24,000; patents valued at £140,000; and a customer list valued at £260,000.On Rosalie Corporation's statement of financial position at December 31, 2011, what amount should be reported as intangible assets?

Accepted Answer

A) £742,000 
B) £766,000 
C) £700,000 
D) £440,000 
A) £742,000 
B) £766,000 
C) £700,000 
D) £440,000

Question 15

The cash debt coverage ratio is computed by dividing net cash provided by operating activities by

Accepted Answer

A) average long-term liabilities. 
B) average total liabilities. 
C) ending long-term liabilities. 
D) ending total liabilities. 
A) average long-term liabilities. 
B) average total liabilities. 
C) ending long-term liabilities. 
D) ending total liabilities.

Question 16

Which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure?

Accepted Answer

A) Current assets 
B) Current liabilities 
C) Plant assets 
D) Long-term liabilities 
A) Current assets 
B) Current liabilities 
C) Plant assets 
D) Long-term liabilities

Question 17

Using IFRS, which of the following items is matched correctly with its basis of valuation for purposes of reporting on the statement of financial position?

Accepted Answer

A) I and A 
B) II and C 
C) III and B 
D) II and B 
A) I and A 
B) II and C 
C) III and B 
D) II and B

Question 18

One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility.Which of the following explanations is a description of financial flexibility?

Accepted Answer

A) The nearness to cash of assets and liabilities. 
B) The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities. 
C) The firm's ability to pay its debts as they mature. 
D) The firm's ability to invest in a number of projects with different objectives and costs. 
A) The nearness to cash of assets and liabilities. 
B) The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities. 
C) The firm's ability to pay its debts as they mature. 
D) The firm's ability to invest in a number of projects with different objectives and costs.

Question 19

Which of the following is a limitation of the statement of financial position?

Accepted Answer

A) Many items that are of financial value are omitted. 
B) Judgments and estimates are used. 
C) Current fair value is not reported. 
D) All of these 
A) Many items that are of financial value are omitted. 
B) Judgments and estimates are used. 
C) Current fair value is not reported. 
D) All of these

Question 20

Statement of financial position information is useful for all of the following except

Accepted Answer

A) assessing a company's risk 
B) evaluating a company's liquidity 
C) evaluating a company's financial flexibility 
D) determining free cash flows. 
A) assessing a company's risk 
B) evaluating a company's liquidity 
C) evaluating a company's financial flexibility 
D) determining free cash flows.

Exam 5: Statement of Financial Position and Statement of Cash Flows

Liquidity refers to the ability of an enterprise to pay its debts as they mature.

Which of the following is not a required supplemental disclosure for the statement of financial position?

Treasury shares should be reported as a(n)

Significant accounting policies may not be

Companies have the option of disclosing information about the nature of their operations and the use of estimates in preparing financial statements.

Companies frequently describe the terms of all long-term liability agreements in notes to the financial statements.

Caroline, Inc.hired a new controller in late 2011.The controller has not prepared financial statements using IFRS before and needs your assistance.In compiling a complete set of financial statements under IFRS, which of the following components must be included?

Working capital is

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows?

Collection of a loan is reported as an investing activity in the statement of cash flows.

Accounting policies disclosed in the notes to the financial statements typically include all of the following except

In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

Under IFRS an adjunct account on the statement of financial position increases an asset, liability, or equity account.

The cash debt coverage ratio is computed by dividing net cash provided by operating activities by

Which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure?

Using IFRS, which of the following items is matched correctly with its basis of valuation for purposes of reporting on the statement of financial position?

One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility.Which of the following explanations is a description of financial flexibility?

Which of the following is a limitation of the statement of financial position?

Statement of financial position information is useful for all of the following except

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Current Liabilities, Provisions, and Contingencies

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

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