Question 1

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 2

Which of the following is a permanent account?

Accepted Answer

A)   dividends
B)   advertising expense
C)   building
D)   selling expense
E)   insurance expenseF) B) and D)
G) None of the above

Question 3

At any point in time, assets must equal the contribution of the creditors only.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   accounts payable, accounts receivable, notes payable
B)   dividends, accounts receivable, notes payable
C)   advertising expense, selling expense, accounts receivable
D)   land, building, accounts payable
E)   common stock, notes payable, landF) A) and E)
G) A) and D)

Question 6

A summary annual report generally has more nonfinancial pages than financial pages.

Accepted Answer

A) True 
 B)False

Question 7

From the point of view of analysis, the unqualified opinion without an explanatory paragraph or explanatory language carries the highest degree of reliability.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)   unqualified opinion
B)   qualified opinion
C)   adverse opinion
D)   clean opinion
E)   disclaimer of opinionF) A) and C)
G) All of the above

Question 9

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 10

Sometimes financial statements are presented without an accompanying accountant's report.

Accepted Answer

A) True 
 B)False

Question 11

Which of these statements is not true?

Accepted Answer

A)   Asset, liability, and stockholders' equity accounts are referred to as permanent accounts.
B)   Revenue, expense, and dividend accounts are described as temporary accounts.
C)   Temporary accounts are closed at the end of the period to retained earnings.
D)   The balance sheet will not balance until the temporary accounts are closed to retained earnings.
E)   With double-entry, each transaction is recorded twice.F) A) and D)
G) B) and C)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

It is generally recognized that the market is more efficient when dealing with small firms that are not trading on large organized stock markets.

Accepted Answer

A) True 
 B)False

Question 14

A review has substantially less scope than an examination in accordance with generally accepted auditing standards.

Accepted Answer

A) True 
 B)False

Question 15

The accrual basis needs numerous adjustments at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a temporary account?

Accepted Answer

A)   advertising expense
B)   land
C)   building
D)   accounts payable
E)   bonds payableF) A) and D)
G) A) and C)

Question 17

A company must have majority voting shares of the other company in order to consolidate.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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

A)   $30,000
B)   $40,000
C)   $60,000
D)   $30,000.
E)   $70,000F) A) and C)
G) A) and B)

Question 20

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

Accepted Answer

A) True 
 B)False

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

A company must have majority voting shares of the other company in order to consolidate.

Correct AnswerverifiedShow Answer

At any point in time, assets must equal the contribution of the creditors only.

Correct AnswerverifiedShow Answer

From the point of view of analysis, the unqualified opinion without an explanatory paragraph or explanatory language carries the highest degree of reliability.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Sometimes financial statements are presented without an accompanying accountant's report.

Correct AnswerverifiedShow Answer

It is generally recognized that the market is more efficient when dealing with small firms that are not trading on large organized stock markets.

Correct AnswerverifiedShow Answer

A summary annual report generally has more nonfinancial pages than financial pages.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of these statements is not true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following is a temporary account?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a permanent account?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The accrual basis needs numerous adjustments at the end of the accounting period.

Correct AnswerverifiedShow Answer

A review has substantially less scope than an examination in accordance with generally accepted auditing standards.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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