Question 1

Which of the following is not a true statement relating to the Treadway Commission?

Accepted Answer

The Treadway Commission was established before the Sarbanes-Oxley Act and is not specifically formed to support it. It is a private-sector initiative focused on improving financial reporting and internal controls.

Question 2

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

Accepted Answer

The SEC's integrated disclosure system aims to improve and standardize disclosure requirements, not to lessen the impact of the FASB.

Question 3

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

Accepted Answer

Management is responsible for the preparation and integrity of financial statements.

Question 4

Which of the following statements is not correct concerning summary annual reports?

Accepted Answer

The statement "A summary annual report is adequate for reasonable analysis" is not correct. While a summary annual report provides a brief overview of a company's financial performance, it may not provide enough information for a thorough analysis. It is meant to supplement the full annual report and not be a substitute for it.

Question 5

A disclaimer of opinion is necessary when the exceptions to fair presentation are so material that a qualified opinion is not justified.

Accepted Answer

The answer of A disclaimer of opinion is necessary when...

Question 6

Which of the following is a permanent account?

Accepted Answer

Permanent accounts are those that are not closed at the end of the accounting period. Building is a permanent account because it is an asset that will be used by the company for more than one accounting period.

Question 7

Which of the following statements is not true?

Accepted Answer

The accountant's report on reviewed financial statements does not express an opinion, but rather states whether the accountant is aware of any material modifications that should be made to the financial statements.

Question 8

Subsequent events are those that occur after the balance sheet date but before the statements are issued.

Accepted Answer

Subsequent events refer to those events that occur after the balance sheet date but before the financial statements are issued. These events should be disclosed in the footnotes to the financial statements if they are considered material and could significantly impact the financial position of the company.

Question 9

Which of the following is not a type of audit opinion?

Accepted Answer

A clean opinion is not a type of audit opinion.

Question 10

Which of the following is a temporary account?

Accepted Answer

Advertising expense is a temporary account because it is closed out at the end of the accounting period and its balance is transferred to the income statement.

Question 11

Which of the following would not be considered a subsequent event?

Accepted Answer

Hiring employees is an operational decision and does not affect the financial statements directly, unlike financial transactions or events that provide additional information about conditions that existed at the balance sheet date.

Question 12

Smith Company had retained earnings of $60,000 at the end of the current year.For the current year, income was $30,000 and dividends $10,000.What was the balance in retained earnings at the end of the prior year?

Accepted Answer

Retained earnings at the end of the current year can be calculated by adding the income for the year minus the dividends paid to the beginning balance of retained earnings, so we can set up an equation: 
Retained earnings (end of current year) = Retained earnings (beginning of year) + Income - Dividends
$60,000 = Retained earnings (beginning of year) + $30,000 - $10,000
$60,000 = Retained earnings (beginning of year) + $20,000
Retained earnings (beginning of year) = $40,000.

Question 13

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

The matching principle requires that expenses be recorded in the same period as the revenues they help to generate, ensuring accurate financial reporting.

Question 14

Which of these statements is not true?

Accepted Answer

The statement "The form of the journals are the same from industry to industry" is not true. The form and structure of journals may vary depending on the industry and the specific needs of a company.

Question 15

Which of the following is a type of audit opinion that a firm would usually prefer?

Accepted Answer

An unqualified opinion is the most favorable audit opinion, indicating that the financial statements are presented fairly in all material respects.

Question 16

In terms of debits and credits, which of the following accounts have the same normal balances?

Accepted Answer

The answer of In terms of debits and credits, which...

Question 17

Which of these statements is not true?

Accepted Answer

The answer of Which of these statements is not true?
...

Question 18

Tiffin Company had retained earnings of $50,000 at the end of last year.For the current year, income was $20,000 and dividends $15,000.What is the balance in retained earnings at the end of the current year?

Accepted Answer

Retained earnings at the end of the current year can be calculated as follows:
Beginning retained earnings + Income - Dividends
= $50,000 + $20,000 - $15,000
= $55,000
Therefore, the balance in retained earnings at the end of the current year is $55,000, which is option C.

Question 19

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 note disclosure of accounting policies is required as part of a complete set of financial statements, according to generally accepted accounting principles. The auditor's opinion is typically included but is not technically a financial statement. A ten-year summary and a list of corporate officers are not required financial statements. While historical common-size summaries may be useful, they are not required as part of a complete set of financial statements.

Question 20

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

Accepted Answer

Total assets are calculated as the sum of liabilities and stockholders' equity. Therefore, $70,000 (liabilities) + $50,000 (stockholders' equity) = $120,000 (total assets).

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

Which of the following is not a true statement relating to the Treadway Commission?

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

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

Which of the following statements is not correct concerning summary annual reports?

A disclaimer of opinion is necessary when the exceptions to fair presentation are so material that a qualified opinion is not justified.

Which of the following is a permanent account?

Which of the following statements is not true?

Subsequent events are those that occur after the balance sheet date but before the statements are issued.

Which of the following is not a type of audit opinion?

Which of the following is a temporary account?

Which of the following would not be considered a subsequent event?

Smith Company had retained earnings of $60,000 at the end of the current year.For the current year, income was $30,000 and dividends $10,000.What was the balance in retained earnings at the end of the prior year?

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?

Which of these statements is not true?

Which of the following is a type of audit opinion that a firm would usually prefer?

In terms of debits and credits, which of the following accounts have the same normal balances?

Which of these statements is not true?

Tiffin Company had retained earnings of $50,000 at the end of last year.For the current year, income was $20,000 and dividends $15,000.What is the balance in retained earnings at the end of the current year?

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

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