A Further Look at Financial Statements
Solution 230 (a)
2-69
(10 min.)
Current ratio =
$70,000* $40,000**
= 1.75:1
Working capital = $70,000 – $40,000 = $30,000 (b)
Current ratio =
$50,000* $20,000**
= 2.5:1
Working capital = $50,000 – $20,000 = $30,000 *$70,000 – $20,000
**$40,000 – $20,000
COMPLETION STATEMENTS 231. The rules and practices that are recognized as general guides for financial reporting are called ______________ _____________ _______________. Ans: N/A, SO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: FSA
232. In accounting, ____________ results when different companies use the same accounting principles. Ans: N/A, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
233. The constraint of _______________ refers to items in financial statements that are likely to influence the decision of a reasonably prudent investor or creditor. Ans: N/A, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
234. The _______________ constraint relates to the fact that providing information is costly. Ans: N/A, SO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
235. The earnings per share value is calculated by dividing net income – preferred stock dividends by _______________ ______________ ______________. Ans: N/A, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
236. Assets that are expected to be converted to cash or used in the business within a relatively short period of time are called ______________. Ans: N/A, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
237. The ________________ is current assets divided by current liabilities. Ans: N/A, SO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics
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