1.A balance sheet prepared in accordance with U.S. GAAP typically:

Multiple Choice

• reports common stock at the current market price of the stock.

• provides critical information for understanding a firms capital structure.

• helps to determine the proper mix of debt and equity financing.

• provides critical information for understanding a firms profitability.

2.In a common-size balance sheet, each balance sheet account is expressed as a percentage of total:

Multiple Choice

• liabilities.

• assets.

• shareholders equity.

• assets plus shareholders equity.

3.Accrued liabilities represent:

Multiple Choice

• income that has not yet been recognized on the income statement.

• expenses that have not yet been recognized on the income statement.

• expenses that have been recognized on the income statement but not yet been paid.

• income that has been recognized on the income statement but not yet collected.

4.Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. He notices that the Retained Earnings account increased from the beginning of the year. This information is used to:

Multiple Choice

• increase cash flow from financing as it indicates receipt of payments from customers.

• decrease cash flow from investing as it indicates payment of debt.

• increase cash flow from operations as it signifies a net income.

• decrease cash flow from operations as it indicates a net loss.

5.Retained earnings are reported on the balance sheet at:

Multiple Choice

• historical cost.

• current market value.

• net realizable value.

• a mixture of different measurement bases.