2. Question: As you read the balance sheet from top to bottom, what is happening to the liquidity of the assets?

3. Question: The inventory will be listed on the balance sheet under which category?

4. Question: When raw material is finally produced into a product to be sold, what category is it listed under?

5. Question: What is the change in the equity section of the balance sheet when a firm reduces its accounts payable balance by using cash?

6. Question: If a bond the company issued matures between six and 12 months from today, how is the firm is required to list this?

7. Question: Using the Accounting equation, how would you calculate liabilities given only the balances for total assets and total equity?

8. Question: If the balance sheet lists liabilities as $5 million and shareholders equity as $8 million, what is the book value of the assets?

9. Question: The firm's net fixed assets are listed as zero, does this mean there are no property, plant or equipment? Explain.

10. A firm purchases Equipment costing $20,000. They received a really good deal on this equipment which normally would have cost them $30,000. They have decided the useful life of the equipment is 4 years. Calculate the balance in the accumulated depreciation account at the end of the second year of use.

11. A firm purchases Equipment costing $20,000. They received a really good deal on this equipment which normally would have cost them $30,000. They have decided the useful life of the equipment is 4 years. Calculate the book value of the equipment at the end of the second year of use.

12. A company borrows $12,000 at 12%. The fixed payment each month is $300. Calculate the interest expense and the principal pay- down in the second payment.

13. A company leases a piece of equipment. The cost of the equipment is $100,000 and has a useful life of 8 years. The lease lasts for 5 years, the company may buy the equipment at fair market value at the end of the lease and the total value of the principal payments on the lease equals $80,000. Is this a capital lease or an operating lease and why?