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1.
Balance sheets balance taxes with income.
False. Balance sheets balance assets with liabilities. Taxes and income are included in assets and liabilities.
2.
Shareholder equity is the sum of the companys assets.
False. The value of assets remaining after all the liabilities have been accounted for belongs to the shareholders.
3.
Current liabilities are those that are paid ______.
Within one year. This is the accepted time limit.
4.
How long must the useful life of an asset be for it to be treated as a fixed asset?
More than one year. If its useful life is more than one year, an asset will be considered fixed.
5.
How do you know when a document is a balance sheet?
Its assets equal its liabilities and shareholder equity. To be a balance sheet, all of the assets must equal all of the liabilities and shareholder equity.
6.
Balance sheets provide information on a companys stock performance.
False. Balance sheets provide financial information, but not stock performance information.
7.
The resources that a firm buys are not considered assets unless they are believed to provide economic benefits.
True. Otherwise, they are merely items.
8.
If the total liabilities of a company are 2 million dollars, and total assets are 5 million dollars, how much is shareholder equity?
3 million dollars. Shareholder equity is the difference between total assets and total liabilities. When creating a balance sheet, however, you must include shareholder equity with liabilities.
