Question 1

Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Accepted Answer

A) True 
 B)False

Question 2

A measure of profitability is the:

Accepted Answer

A)  current ratio.
B)  debt to total assets ratio.
C)  earnings per share.
D)  working capital.E) B) and D)
F) None of the above

Question 3

Investors are usually most interested in evaluating:

Accepted Answer

A)  liquidity and solvency.
B)  solvency and marketability.
C)  liquidity and profitability.
D)  profitability and solvency.E) B) and D)
F) C) and D)

Question 4

Liquidity ratios are concerned with the frequency and amounts of dividend payments.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a financial statement element?

Accepted Answer

A)  Liabilities
B)  Equity
C)  Expenses
D)  Fair valueE) A) and B)
F) A) and C)

Question 6

Two recognition principles are the fair value basis of accounting and the going concern assumption.

Accepted Answer

A) True 
 B)False

Question 7

The two qualitative characteristics that are defined in terms of what influences or makes a difference to a decision maker are:

Accepted Answer

A)  faithful representation and materiality.
B)  comparability and timeliness
C)  materiality and relevance.
D)  relevance and understandabilityE) None of the above
F) A) and B)

Question 8

Using a simplified version of Canadian GAAP for small companies in order to reduce the cost of providing financial information is an example of the application of materiality.

Accepted Answer

A) True 
 B)False

Question 9

The investment classification on the statement of financial position normally includes investments that are intended to be held for a short period of time (less than one year).

Accepted Answer

A) True 
 B)False

Question 10

Special rights and privileges that provide a future economic benefit to the company are classified as intangible assets.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not normally a current liability?

Accepted Answer

A)  Salaries payable
B)  Accounts payable
C)  Income tax payable
D)  Bonds payableE) None of the above
F) B) and D)

Question 12

If accounting information has relevance, it:

Accepted Answer

A)  is not required to be complete
B)  will not have predictive value.
C)  will only make a difference for internal stakeholders.
D)  will make a difference in users' decisions.E) All of the above
F) A) and D)

Question 13

Listing assets and liabilities in reverse order of liquidity is not permitted in Canada.

Accepted Answer

A) True 
 B)False

Question 14

Office equipment is classified on the statement of financial position as:

Accepted Answer

A)  a current asset.
B)  property, plant, and equipment.
C)  shareholders' equity.
D)  a long-term investment.E) None of the above
F) A) and D)

Question 15

Use the following information to answer questions : 
-The dollar amount of current assets is:

Accepted Answer

A)  $ 26,000.
B)  $ 40,000.
C)  $ 25,000.
D)  $196,000.E) B) and C)
F) B) and D)

Question 16

A useful measure of solvency is the:

Accepted Answer

A)  current ratio.
B)  price-earnings ratio.
C)  earnings per share.
D)  debt to total assets.E) A) and B)
F) C) and D)

Question 17

Which of the following is not considered a measure of liquidity?

Accepted Answer

A)  Current ratio
B)  Working capital
C)  Both current ratio and working capital
D)  Debt to total assetsE) A) and B)
F) All of the above

Question 18

The conceptual framework is fundamentally similar for both Canadian publicly traded companies and Canadian private companies.

Accepted Answer

A) True 
 B)False

Question 19

Trademarks would appear in which section of the statement of financial position?

Accepted Answer

A)  Shareholders' equity
B)  Investments
C)  Intangible assets
D)  Current assetsE) A) and B)
F) C) and D)

Question 20

A short-term creditor is primarily interested in the __________ of the borrower.

Accepted Answer

A)  liquidity
B)  profitability
C)  comparability
D)  solvencyE) A) and D)
F) C) and D)

Exam 2: A Further Look at Financial Statements

A measure of profitability is the:

Correct AnswerverifiedShow Answer

Two recognition principles are the fair value basis of accounting and the going concern assumption.

Correct AnswerverifiedShow Answer

Using a simplified version of Canadian GAAP for small companies in order to reduce the cost of providing financial information is an example of the application of materiality.

Correct AnswerverifiedShow Answer

The conceptual framework is fundamentally similar for both Canadian publicly traded companies and Canadian private companies.

Correct AnswerverifiedShow Answer

If accounting information has relevance, it:

Correct AnswerverifiedShow Answer

Which of the following is not normally a current liability?

Correct AnswerverifiedShow Answer

Which of the following is not considered a measure of liquidity?

Correct AnswerverifiedShow Answer

Investors are usually most interested in evaluating:

Correct AnswerverifiedShow Answer

Which of the following is not a financial statement element?

Correct AnswerverifiedShow Answer

A useful measure of solvency is the:

Correct AnswerverifiedShow Answer

Trademarks would appear in which section of the statement of financial position?

Correct AnswerverifiedShow Answer

A short-term creditor is primarily interested in the __________ of the borrower.

Correct AnswerverifiedShow Answer

Listing assets and liabilities in reverse order of liquidity is not permitted in Canada.

Correct AnswerverifiedShow Answer

Solvency ratios measure the short-term ability of the company to pay its maturing obligations.

Correct AnswerverifiedShow Answer

Liquidity ratios are concerned with the frequency and amounts of dividend payments.

Correct AnswerverifiedShow Answer

Office equipment is classified on the statement of financial position as:

Correct AnswerverifiedShow Answer

The two qualitative characteristics that are defined in terms of what influences or makes a difference to a decision maker are:

Correct AnswerverifiedShow Answer

The investment classification on the statement of financial position normally includes investments that are intended to be held for a short period of time (less than one year).

Correct AnswerverifiedShow Answer

Special rights and privileges that provide a future economic benefit to the company are classified as intangible assets.

Correct AnswerverifiedShow Answer

Use the following information to answer questions : -The dollar amount of current assets is:

Correct AnswerverifiedShow Answer

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