part 2 - balance sheet changes; income measurement

Question 1

marketable securities

Answer 1

ones expected to be converted into cash within one year; therefore, they are current assets

Question 2

cash and cash equivalents

Answer 2

cash + investments in very safe, short-term, liquid securities like money market funds

Question 3

prepaid expenses

Answer 3

intangible assets that will be used up in the near future; they are intangible current assets

Question 4

tangible assets

Answer 4

ones that are physical incl. buildings, trucks and machines

tangible, non-current assets include property, plant and equipment

intangible, non-current assets include bonds and other longer-term securities (recall that securities intended to be turned into cash within one year are called marketable securities and are listed as current assets)

Question 5

intangible assets

Answer 5

can’t be touched; includes things like insurance policies

Question 6

patents and trademarks

Answer 6

are non-current and intangible assets

Question 7

accounts payable

Answer 7

is a current liability because it is money the entity owes its suppliers in the short term

Question 8

bank loan payable

Answer 8

special form of accounts payable that is owed for a bank loan

Question 9

accrued liabilities

Answer 9

money owed to employees and others for services they have provided but have not yet been paid for

Question 10

estimated tax liability

Answer 10

amount owed to government for taxes; it is a current liability because taxes are paid each year

Question 11

note payable

Answer 11

if an entity borrows from a lender, you will see a loan on its balance sheet under liabilities; this loan is called a note

Question 12

double-entry system

Answer 12

accounting is called a double-entry system because each transaction results in two entries on a company’s balance sheet