Problem 1: In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results?
a. Notes to the financial statements
b. Management discussion and analysis section
c. Balance sheet
d. Auditor's report
Problem 2: Which of the statements below is not true?
a. An adjusted trial balance should show ledger account balances.
b. An adjusted trial balance can be used to prepare financial statements.
c. An adjusted trial balance proves the mathematical equality of debits and credits in the ledger.
d. An adjusted trial balance is prepared before all transactions have been journalized.
Problem 3: The purpose of the post-closing trial balance is to:
a. prove that no mistakes were made.
b. prove the equality of the permanent account balances that are carried forward into the next accounting period.
c. prove the equality of the temporary account balances that are carried forward into the next accounting period.
d. list all the balance sheet accounts in alphabetical order for easy reference.
Problem 4: If ending inventory is overstated, net income and assets will be:
Net Income Assets
a. Understated Understated
b. Overstated Overstated
c. Understated Overstated
d. Overstated Understated
Problem 5: Larken Company's records show the following for the month of January:
Total Retained Earnings at January 1 $400,000
Total Retained Earnings at January 31 500,000
Total Revenues 670,000
Total Dividends Declared 40,000
Total expenses for January were:
a. $740,000.
b. $770,000.
c. $570,000.
d. $530,000.
Problem 6: Which of the following would not be included in the operating activities section of a statement of cash flows?
a. Cash inflows from returns on loans (i.e., interest)
b. Cash inflows from returns on equity securities (i.e., dividends)
c. Cash outflows to governments for taxes
d. Cash outflows to reacquire treasury stock
Problem 7: The statement of cash flows is a(n)
a. required supplemental financial statement.
b. required basic financial statement.
c. optional basic financial statement.
d. optional supplementary statement.
Problem 8: The primary accounting standard-setting body in the United States is the
a. Securities an Exchange Commission.
b. Accounting Principles Board.
c. Financial Accounting Standards Board.
d. Internal Revenue Service.