Balnace Sheet

Question 1

Define “current liability.”

Answer 1

A liability expected to be extinguished through the use of current assets or by the incurrence of other current liabilities

Question 2

How are current assets listed on the balance sheet?

Answer 2

Declining order of liquidity

Question 3

Define “measurement base.”

Answer 3

The attribute of an account being measured and reported

Question 4

Describe the formula for quick or acid test ratio.

Answer 4

(Cash + Short‐term investments + Accounts receivable)/Current liabilities

Question 5

Define “net realizable value.”

Answer 5

The amount the firm expects to receive from the sale or collection of an item

Question 6

What is a valuation account used for?

Answer 6

Used to increase or decrease the book value of an item to a measure of current value

Question 7

What is the operating cycle?

Answer 7

The period of time from the purchase of inventory, to payment of the payable on inventory purchase, to the sale of goods, to the collection of receivable, and then to purchasing inventory all over again

Question 8

What is another name for the balance sheet?

Answer 8

The statement of financial position