Chapter 3: The Balance Sheet

Question 1

Long-term assets that are not suitable for reporting under any of the previous classifications

Answer 1

Other Assets

Question 2

The flip side of accounts receivable
When one company sells on credit, creating for itself an account receivable, the company on the other side of the transaction is buying on credit, creating this

Answer 2

Account Payable

Question 3

Amounts owned to a business by its credit customers are usually collected in cash within 10 to 60 days

Answer 3

Accounts Receivable

Question 4

Reflects the wear and tear, or depreciation, of those items since they were originally purchased

Answer 4

Accumulated Depreciation

Question 5

The grouped together and reported changes which companies experience increases and decreases in equity each year because of the movement of market prices or exchange rates

Answer 5

Accumulated Other Comprehensive Income

Question 6

Invested by stockholders that exceeds the par value of the issued shares

Answer 6

Additional Paid-In Capital

Question 7

Probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events

Answer 7

Asset

Question 8

The proportion of total assets in each asset category, is determined to a large degree by the industry in which the operates

Answer 8

Asset Mix

Question 9

A listing of an organization’s assets and of its liabilities at a certain time

Answer 9

Balance Sheet

Question 10

Capital Lease Obligations

Answer 10

A long-term liability in the balance sheet

Question 11

Coins and currency as well as the balances in company checking and savings account

Answer 11

Cash

Question 12

Stockholders’ Equity Investment

Answer 12

Common Stock

Question 13

Cash, accounts receivable, and inventory

Answer 13

Current Assets

Question 14

Those obligations expected to be paid within one year, the most common being accounts payable

Answer 14

Current Liabilities

Question 15

Some liabilities, such as mortgages, are payable in equal monthly installments over a specified number of years. The portion of these liabilities that is payable within 12 months from the balance sheet date

Answer 15

Current Portion of Long-Term Debt

Question 16

The income tax expected to be paid in future years on income that has already been reported in the income statement but, which, because of the tax law, has not yet been taxed

Answer 16

Deferred Income Tax Liability

Question 17

A financial instrument, such as an option or a future, that derives its value from the movement of a price, an exchange rate, or an interest rate associated with some other item

Answer 17

Derivative

Question 18

Convey the details in a narrative note without ever including anything in the financial statements themselves

Answer 18

Disclosure

Question 19

Residual interest in the assets of an entity that remains after deducting its liabilities

Answer 19

Equity

Question 20

It is an exchange of promises about the future

Answer 20

Executory Contract

Question 21

The percentage of total financing (liabilities plus equity) in each individual category

Answer 21

Financing Mix

Question 22

Assets that have no physical or tangible characteristics

Answer 22

Intangible Assets

Question 23

The name given to goods held for sale in the normal course of business

Answer 23

Inventory

Question 24

Composed of publicly traded stocks and bonds

Answer 24

Investment Securities

Question 25

Probable future sacrifice of economic benefit arising from a present obligation of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

Answer 25

Liability

Question 26

Long-term notes, bonds, mortgages, and similar obligations on the balance sheet

Answer 26

Long-Term Debt

Question 27

Those assets that you expect to still be around next year when you prepare the balance sheet again

Answer 27

Long-Term Investments

Question 28

Arises when a corporation has subsidiaries that are not 100 percent owned by the corporation

Answer 28

Noncontrolling interest

Question 29

The market value of the shares at issuance

Answer 29

Par Value

Question 30

Stockholders’ equity investment

Answer 30

Preferred Stock

Question 31

Payments in advance for business expenses

Answer 31

Prepaid Expenses

Question 32

Exactly what the label implies: land, buildings, machinery, tools, furniture, fixtures, and vehicles used by a company in conducting its business activities

Answer 32

Property, Plant, and Equipment

Question 33

Boil down all the estimates and judgments into one number and report that one number in formal statements

Answer 33

Recognition

Question 34

The cumulative amount of a corporation’s profits that have been reinvested on behalf of the stockholders

Answer 34

Retained Earnings

Question 35

Formal, interest-bearing loans that are expected to be paid back within one year

Answer 35

Short-Term payable loans

Question 36

The difference between assets and liabilities in a corporation

Answer 36

Stockholders’ Equity

Question 37

The process of determining how an economic event impacts the financial statements

Answer 37

Transaction Analysis

Question 38

The repurchased shares when a company buys back its own shares

Answer 38

Treasury Stock

Question 39

Represents the company’s obligation to provide service to customers who have paid the company for a service they have not yet received

Answer 39

Unearned Revenue

Question 40

Once it has been determined that an item should be recognized in financial statements, the question then arises about what dollar amount to assign to the item

Answer 40

Valuation