Analysis Intermediate: Understanding the Balance Sheet

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1.
The company E-Publisher.com owns exclusive rights to its material. This copyright is an asset.
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True. Copyright is an intangible asset.
2.
Too many liabilities on a company balance sheet can indicate the danger of bankruptcy.
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True. Too many liabilities make investors nervous.
3.
Balance sheets balance taxes with income.
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False. Balance sheets balance assets with liabilities. Taxes and income are included in assets and liabilities.
4.
The resources that a firm buys are not considered assets unless they are believed to provide economic benefits.
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True. Otherwise, they are merely items.
5.
Balance sheets provide information on a companys stock performance.
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False. Balance sheets provide financial information, but not stock performance information.
6.
On the balance sheet, plants and machinery are included under _______.
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Assets. Since they provide economic benefit to a company, they are assets.
7.
If the total liabilities of a company are 2 million dollars, and total assets are 5 million dollars, how much is shareholder equity?
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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.
8.
Shareholder equity is the sum of the companys assets.
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False. The value of assets remaining after all the liabilities have been accounted for belongs to the shareholders.