1. The basis for classifying assets as current or noncurrent is conversion to cash within

a. the accounting cycle or one year, whichever is shorter.

b. the operating cycle or one year, whichever is longer.

c. the accounting cycle or one year, whichever is longer.

d. the operating cycle or one year, whichever is shorter.

2. The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in

a. inventory back into cash, or 12 months, whichever is shorter.

b. receivables back into cash, or 12 months, whichever is longer.

c. tangible fixed assets back into cash, or 12 months, whichever is longer.

d. inventory back into cash, or 12 months, whichever is longer.

3. The current assets section of the balance sheet should include

a. machinery.

b. patents.

c. goodwill.

d. inventory.

4. Which of the following is a current asset?

a. Cash surrender value of a life insurance policy of which the company is the bene-ficiary.

b. Investment in equity securities for the purpose of controlling the issuing company.

c. Cash designated for the purchase of tangible fixed assets.

d. Trade installment receivables normally collectible in 18 months.

5. Which of the following should not be considered as a current asset in the balance sheet?

a. Installment notes receivable due over 18 months in accordance with normal trade practice.

b. Prepaid taxes which cover assessments of the following operating cycle of the business.

c. Equity or debt securities purchased with cash available for current operations.

d. The cash surrender value of a life insurance policy carried by a corporation, the beneficiary, on its president.

6. Equity or debt securities held to finance future construction of additional plants should be classified on a balance sheet as

a. currentassets.

b. property, plant, and equipment.

c. intangible assets.

d. long-term investments.

7. When a portion of inventories has been pledged as security on a loan,

a. the value of the portion pledged should be subtracted from the debt.

b. an equal amount of retained earnings should be appropriated.

c. the fact should be disclosed but the amount of current assets should not be affected.

d. the cost of the pledged inventories should be transferred from current assets to noncurrent assets.

8. Which of the following is not a long-term investment?

a. Cash surrender value of life insurance

b. Franchise

c. Land held for speculation

d. A sinking fund

9. A generally accepted method of valuation is

1. trading securities at market value.

2. accounts receivable at net realizable value.

3. inventories at current cost.

a. 1

b. 2

c. 3

11. Which item below is not a current liability?

a. Unearned revenue

b. Stock dividends distributable

c. The currently maturing portion of long-term debt

d. Trade accounts payable