Quiz Ch 03 – T/F Limitations of Cash-Basis Accounting
Financial Accounting
Thomas, Tietz, and Harrison
12th Edition
Cash-basis accounting may result in errors in income statements and balance sheets.
Cash-basis accounting may result in errors in income statements and balance sheets.
For an entity to be deemed adequately liquid, it should have a surplus of current assets over current liabilities.
Accounts receivable are less liquid than inventory since goods must be sold by the company first.
Loan agreements may stipulate that a company must maintain a minimum current ratio and/or a maximum debt ratio.
True or false: A high market value of assets implies a high market value of liabilities.
True or false: The market value of shareholders’ equity claim equals the difference between the market values of assets and liabilities.
True or false: A United States Treasury “strip” is effectively a zero-coupon bond.
True or false: A positive net income gives a positive cash flow from operations in that period.
The dividends account is classified as a permanent account.
The prepaid expense of one company is the unearned revenue of another company.