Chapter 8 Balance Sheet

Question 1

Max Smith runs a small grocery store. The balance sheet as of March 31, 20xx shows land of $180,000 and building of $72,000 under the ASSET column. He bought the land and building exactly three years prior to this statement’s date. Each year Max claimed 5% depreciation expense. What was the purchase price of the land?

(1) $208,373
(2) $180,000
(3) $209,943
(4) Impossible to calculate with the information provided

Answer 1

2

notice we didnt fall for this one!! the land does not incure depreciation expense, on the building does!!!

Question 2

Which of the following would generally be found in the current liabilities section of a balance sheet?

(1) Current portion of long-term debt
(2) Property taxes payable
(3) Income taxes payable
(4) All of the above

Answer 2

4

Question 3

Which one of the following will NOT be found on the Balance Sheet of a corporation?

(1) number of shares issued
(2) original cost of the property owned by the corporation
(3) names of the corporation’s shareholders
(4) retained earnings to date

Answer 3

4

Question 4

When referring to the assets portion of a balance sheet, the items are generally listed in order of liquidity.
Which of the following correctly lists assets from most liquid to least liquid?

(1) Accounts receivable, inventories, accounts payable, marketable securities
(2) Marketable securities, accounts receivable, inventories, prepaid expenses
(3) Cash, accounts receivable, land, marketable securities
(4) Building, cash, prepaid expenses, inventories

Answer 4

2

Question 5

RE/LAX Realty Inc. has ended the current year with a net income of $234,000. During the year, RE/LAX issued $14,000 in dividends, incurred $112,000 of operating expenses, and paid $15,000 in taxes. Which of the following most likely occurred on RE/LAX’s balance sheet?

(1) Owners’ equity increased by $234,000.
(2) Revenue decreased by $14,000.
(3) Net income increased by $234,000.
(4) Retained earnings increased by $220,000.

Answer 5

4

Question 6

Yuppie is the sole proprietor of The Mountain Bike Emporium. On her BALANCE SHEET as at December 31, 20xx, TOTAL ASSETS were $185,900. If the only LIABILITIES were Accounts Payable of $2,900 and Long-term Debt of $89,450, what is the amount of Owner’s Equity: Ms. Yuppie, Capital account?

(1) $93,550
(2) $92,350
(3) $185,900
(4) impossible to calculate with the information provided

Answer 6

1

185,900 - 2,900 - 89,450

=93550.00

Question 7

In the case of a proprietorship, which one of the following accounts represents the “link between the income statement and the balance sheet”?

(1) net income
(2) net assets
(3) depreciation expense
(4) retained earnings

Answer 7

1

Question 8

which of the following would generally not be found in the current liabilities section of a balance sheet

1. current portion of long term debt
2. property tax payable
3. income tax payable
4. rent receivable

Answer 8

4