Understanding Balance Sheets
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Question 1 of 14
1. Question
Which of the following is least likely a defining quality of an asset?
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Question 2 of 14
2. Question
Which of the following is the closest definition of solvency?
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Question 3 of 14
3. Question
Which of the following costs should most likely be included in inventory costs for a manufacturing firm?
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Question 4 of 14
4. Question
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?
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Question 5 of 14
5. Question
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?
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Question 6 of 14
6. Question
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:
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Question 7 of 14
7. Question
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?
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Question 8 of 14
8. Question
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?
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Question 9 of 14
9. Question
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?
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Question 10 of 14
10. Question
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?
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Question 11 of 14
11. Question
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?
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Question 12 of 14
12. Question
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?
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Question 13 of 14
13. Question
Which of the following will most likely not affect the statement of changes in stockholder’s equity?
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Question 14 of 14
14. Question
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?
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