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1500%20Quiz%20#4 Solutions.doc.docx

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Department
Administrative Studies
Course Code
ADMS 1500
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all

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AK/ADMS 1500 3.0 Quiz #4: The Balance Sheet: Solutions: 1: The balance sheet reports: a) the assets, liabilities and equity of the organization; b) the revenues, expenses and net income for a period of time; c) the profitability of the organization; d) the owners of the organization; e) none of the above. 2: In the balance sheet assets are presented: a) most highly liquid, through to least liquid; b) in order of acquisition; c) at appraised values; d) least liquid through to most highly liquid; e) none of the above. 3: Cash, receivables and inventory are examples of: a) long-term assets, as the organization will always have them; b) long-term assets as they are intended to be held forever; c) current assets because they can be used to pay liabilities; d) current assets because they are likely to be turned over within one year; e) none of the above. 4: Accounts receivable should be reported in the balance sheet at: a) historic cost, less an allowance for uncollectible accounts; b) net realizable value; c) the amount you eventually expect to collect; d) all of the above; e) none of the above. 5: Long-term assets should be reported in the balance sheet at: a) historic cost, less an allowance for depreciation; b) realizable value; c) replacement value; d) marketable value; e) all, or none, of the above. 6: Freda's Flowers Ltd. has inventory of flowers on hand as at 24 December that had cost $1,000. Due to closing for the Christmas holidays it is unlikely that these will be fit for sale when they reopen in January. The balance sheet valuation of inventory of flowers should be: a) $1,000, based on historic cost; b) $1,000, based on net realizable value; c) nil, based on net realizable value; d) $500, as a compromise between cost and realizable value; e) nil, based on the first-in-first-out inventory flow model. 7: On 31 December Freda’s Flowers Ltd. had inventory of wrapping materials and sundry supplies of $2,500. Sales turnover for the year was $500,000. The inventory turnover ratio was: a) 200 times per year; ($500,000/$2,500 = 200) b) 20 times per year; c) 5 times per year; d) 1.825 days; e) none of the above. 8: As at 31 December Freda’s Flowers Ltd. had accounts receivable of $27,400. The receivables collection period was: a) 18.25 times per year; b) 36.5 times per year; c) 20 days; ($27,400/($500,000/365)=20 days) d) 31.5 days; e) none of the above. st 9: Freda’s Flowers Ltd. paid an insurstce premium of $15,000 on 1 October. This gave the business “all risks” cover for one year. As at 31 December Freda’s Flowers would record in the balance sheet: a) insurance expense of $15,000; b) insurance expense of $3,750; c) insurance expense of $11,250; d) prepaid insurance of $11,250; ($15,000 * 9/12 = $11,250) e) none of the above. 10: Freda’s Flowers Ltd. owns land that had cost $100,000 10 years ago. The current market value had been appraised at $170,000. In the balance sheet the value of land would be shown as: a) $100,000, based on cost; b) $50,000, based on cost less depreciation; c) $170,000 based on appraised value; d) $125,000 based on earning potential; e) none of the above. 11: Freda's Flowers Ltd. has store fittings that had originally cost $22,000 in 1998. The expected useful life is 10 years, with a residual value of $2,000. Depreciation is calculated using the straight-line method. The annual depreciation expense is: a) $2,200; b) $2,000; (($22,000 - $2,000)/10 years = $2,000 per year) c) $4,000; d) $4,400; e) none of the above. 12: Freda's Flowers Ltd. has store fittings that had originally cost $22,000 in 1998. The expected useful life is 10stears, with a residual value of $2,000. Depreciation is calculated using the straight-line method. As at 31 December 2001 the balance sheet would show store fittings
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