Understanding Balance Sheets

Which of the following is least likely a defining quality of an asset?

Which of the following is the closest definition of solvency?

Which of the following costs should most likely be included in inventory costs for a manufacturing firm?

A carmaker, which reports under IFRS, recently completed production of a batch of cars.

The cost of manufacturing the batch of cars is $20 million.  Due to a recent oversupply in the market, the firm estimates that the cars can only be sold for around $22 million.  The cost to sell these cars is estimated to be $5 million.

What amount should this batch of cars be reported in the firm’s balance sheet?

A carmaker, which reports under US GAAP, recently completed production of a batch of cars.

The cost of manufacturing the batch of cars is $20 million.  Due to a recent oversupply in the market, the firm estimates that the cars can only be sold for around $22 million.  The cost to sell these cars is estimated to be $5 million.  The cost to replace these cars is around $18 million.

What amount should this batch of cars be reported in the firm’s balance sheet?

A travel agency collects the full fee of $10,000 for a tour package from a customer, for a tour that will take place 6 months later.  This $10,000 should be recorded in its balance sheet as:

On 1 Jan 2014, a company bought a machine at a cost of $100,000.  At the point of purchase, the company determined that the machine shall be depreciated using the straight line method, with a depreciation expense of $10,000 per year.

On 1 Jan 2017, the company realises that the recoverable amount for the machine is $50,000.  Under the cost model, how should the company report for this machine on its balance sheet and income statement for 1 Jan 2017?

A company spent $2 million on the research of a new glass making technique, which was eventually patented.

What should be the most appropriate treatment of this $2 million research cost?

ACQ Corp paid $20 million cash to fully acquire its key supplier SUB Corp.

At the point of acquisition, SUB’s net assets was $17 million.  ACQ independently assessed the plant, property and equipment of SUB to be $1 million higher than reported by SUB.

How much goodwill, if any, should ACQ report on its balance sheet from this acquisition exercise?

1 year ago, a manufacturing company bought 100,000 shares of a key supplier at $5 per share.  The shares were reported as available-for-sale.  During the year, a cash dividend of $0.30 per share was distributed.

Today, the market price of the shares are trading at $4 per share.  How should the company report these shares in its financial statements?

A company initially issued 1,000 common shares at $12 per share.

During the year, the company paid out $1 cash dividend per common share.

At the end of the year, the company issued 500 preferred shares at $15 per share,  and bought back 200 common shares at $20 per share.

What is the contributed capital of the company at the end of the year?

The net assets of SUB is valued at $2 million.

ACQ Corp agrees to pay $1.6 million cash to acquire a controlling 80% stake in SUB Corp.

Which of the following best describes what is likely to happen to ACQ’s balance sheet if the deal goes through?

Which of the following will most likely not affect the statement of changes in stockholder’s equity?

An analyst scribbled the 3 liquidity ratios of a company in her notepad, but forgot to label them.

The 3 ratios are:  0.42, 0.65, 1.98

In this order, what are the 3 ratios most likely to be?