1. Select the choice below that contains the correct list of current assets:

a. Cash, accounts receivable, equipment

b. Notes payable, cash, accounts receivable

c. Inventory, cash, building

d. Cash, accounts receivable, inventory

2. The unadjusted cash balance shown on the balance sheet is higher than the cash balance shown on a bank statement as of the same date. One possible explanation is:

a. A check was recorded for a larger amount than it was actually written for

b. Checks have been issued to payees but not yet presented to the bank for payment

c. Deposits made by our company are in transit between the company and the bank.

d. The bank erroneously entered another company's deposit to our account.

3. Supplies inventory is a current asset because:

a. The supplies can be sold for cash

b. The supplies will be used in the business during the next twelve months

c. The value of supplies is immaterial.

d. No liability is associated with this asset.

4. In the balance sheet equation, total assets equal:

a. Current assets

b. Fixed assets

c. Long term liabilities

d. Liabilities and Shareholders’ (Owners’) equity

5. Examples of current liabilities are:

a. Inventory and its related liability to vendors

b. Wages payable and taxes payable

c. Mortgage payable and the building acquired with the loan

d. Rock concert tickets sold a year in advance and the stage gear.

6. Select the best statement below to describe Shareholders' (Owners') equity on the balance sheet.

a. It is the residual claim the owners have on the assets after satisfaction of all liabilities

b. It is what the business can be sold for at the date of the balance sheet

c. It is the cash that can be withdrawn from the business by the owner

d. It is the combined amount of personal and business investments.

7. Kristen Corporation reported current assets of $2 million at the beginning of 2001 and $4 million at the end of 2001. It also reported current liabilities of $1.5 million at the beginning of 2001 and $2 million at the end of 2001. Select the best statement below:

a. Kristen’s current ratio deteriorated during 2001

b. Kristen’s current ratio stayed the same throughout 2001

c. Kristen’s current ratio improved during 2001

d. Not enough information given to calculate the current ratio.

8. The difference between current liabilities and long-term liabilities is:

a. Notes payable are long-term liabilities but not current liabilities

b. The amount of a long-term liability is larger than a current liability

c. A long-term liability is due to be paid off more than a year from the balance sheet date

d. Long term liabilities arise from transactions with banks

9. The retained earnings account is:

a. Shown in the asset section of the balance sheet

b. Cash earned in the business since its inception that the corporation has retained

c. The net income of the company for the current period

d. None of the above answers are correct

10. The three owners of Akiva Corporation are seeking an explanation of why the cash balance for its first year of operations is several $million below the retained earnings balance on the balance sheet even though the owners did not withdraw any cash. Select a possible explanation below:

a. Some of the company's sales were still uncollected at year end

b. The company prepaid insurance for the following year.

c. The company purchased some equipment for cash during the year.

d. Two of the above answers are valid reasons why the retained earnings balance might be higher than the cash balance.