Question 1

The responsibility for the preparation and integrity of financial statements rests with the auditors.

Accepted Answer

A) True 
 B)False

Question 2

Transactions must be external to the company.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not an objective of the SEC's integrated disclosure system?

Accepted Answer

A) To coordinate the Form 10-K requirements with those of the annual report 
B) To lessen the impact of the FASB 
C) To expand the management discussion of liquidity, capital resources, and results of operations 
D) To improve the quality of disclosure 
E) To standardize information requirements

Question 4

The principal financial statements of a corporation are the balance sheet, income statement, and statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

The audit opinion of a public company is similar to an opinion for a private company except for the public company comments will be added as to the effectiveness of internal control over financial reporting.

Accepted Answer

A) True 
 B)False

Question 6

In addition to the balance sheet, the income statement, and the statement of cash flows, a complete set of financial statements must include:

Accepted Answer

A) an auditor's opinion. 
B) a ten-year summary of operations. 
C) a note disclosure of such items as accounting policies. 
D) historical common-size (percentage) summaries. 
E) a list of corporate officers.

Question 7

For public companies reporting under Sarbanes-Oxley, the auditor reports on the firm's internal controls in addition to the audit report.

Accepted Answer

A) True 
 B)False

Question 8

A summary annual report is a condensed annual report that omits much of the financial information included in a typical annual report.

Accepted Answer

A) True 
 B)False

Question 9

In practice, some of the required information in the 10-K is incorporated by reference.

Accepted Answer

A) True 
 B)False

Question 10

Accounts store the monetary information from the recording of transactions.

Accepted Answer

A) True 
 B)False

Question 11

For a business combination, the purchase method views the business combination as the acquisition of one entity by another.The firm doing the acquiring records the identifiable assets and liabilities at fair value at the date of acquisition.

Accepted Answer

A) True 
 B)False

Question 12

A sole proprietorship is a legal entity separate from its owner.

Accepted Answer

A) True 
 B)False

Question 13

T-accounts have a left, or credit, side and a right, or debit, side.

Accepted Answer

A) True 
 B)False

Question 14

Who is responsible for the preparation and integrity of financial statements?

Accepted Answer

A) A cost accountant 
B) Management 
C) An auditor 
D) A bookkeeper 
E) The FASB

Question 15

The proxy is the solicitation sent to stockholders for the election of directors and for the approval of other corporation actions.

Accepted Answer

A) True 
 B)False

Question 16

At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable.This entry is an application for which accounting principle?

Accepted Answer

A) Full disclosure 
B) Materiality 
C) Matching 
D) Going concern 
E) Realization

Question 17

A corporation is considered to be a legal entity separate and distinct from the stockholders.

Accepted Answer

A) True 
 B)False

Question 18

The point of cash receipt for revenue and cash disbursement for expenses is important under the accrual basis when determining income.

Accepted Answer

A) True 
 B)False

Question 19

Contingent liabilities are recorded as a liability only if the loss is considered substantial and the amount is reasonably determinable.

Accepted Answer

A) True 
 B)False

Question 20

If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be:

Accepted Answer

A) $20,000. 
B) $80,000. 
C) $120,000. 
D) $30,000. 
E) $30,000

Exam 2: Introduction to Financial Statements and Other Financial Reporting Topics

The responsibility for the preparation and integrity of financial statements rests with the auditors.

Transactions must be external to the company.

Which of the following is not an objective of the SEC's integrated disclosure system?

The principal financial statements of a corporation are the balance sheet, income statement, and statement of cash flows.

The audit opinion of a public company is similar to an opinion for a private company except for the public company comments will be added as to the effectiveness of internal control over financial reporting.

In addition to the balance sheet, the income statement, and the statement of cash flows, a complete set of financial statements must include:

For public companies reporting under Sarbanes-Oxley, the auditor reports on the firm's internal controls in addition to the audit report.

A summary annual report is a condensed annual report that omits much of the financial information included in a typical annual report.

In practice, some of the required information in the 10-K is incorporated by reference.

Accounts store the monetary information from the recording of transactions.

For a business combination, the purchase method views the business combination as the acquisition of one entity by another.The firm doing the acquiring records the identifiable assets and liabilities at fair value at the date of acquisition.

A sole proprietorship is a legal entity separate from its owner.

T-accounts have a left, or credit, side and a right, or debit, side.

Who is responsible for the preparation and integrity of financial statements?

The proxy is the solicitation sent to stockholders for the election of directors and for the approval of other corporation actions.

At the end of the fiscal year, an adjusting entry is made that increases both interest expense and interest payable.This entry is an application for which accounting principle?

A corporation is considered to be a legal entity separate and distinct from the stockholders.

The point of cash receipt for revenue and cash disbursement for expenses is important under the accrual basis when determining income.

Contingent liabilities are recorded as a liability only if the loss is considered substantial and the amount is reasonably determinable.

If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be: