READING211.Providinginformationabouttheperformanceandfinancialpositionofcompaniessothatuserscanmakeeconomicdecisionsbestdescribestheroleof:A.auditing.B.financialreporting.C.financialstatementanalysis.2.Acompany’scurrentfinancialpositionwouldbestbeevaluatedusingthe:A.balancesheet.B.incomestatement.C.statementofcashflows.3.Acompany’sprofitabilityforaperiodwouldbestbeevaluatedusingthe:A.balancesheet.B.incomestatement.C.statementofcashflows.4.Accountingpolicies,methods,andestimatesusedinpreparingfinancialstatementsaremostlikelyfoundinthe:A.auditor’sreport.B.managementcommentary.C.notestothefinancialstatements.5.Informationaboutmanagementanddirectorcompensationwouldleastlikelybefoundinthe:A.auditor’sreport.B.proxystatement.C.notestothefinancialstatements.6.Informationaboutacompany’sobjectives,strategies,andsignificantriskswouldmostlikelybefoundinthe:A.auditor’sreport.B.managementcommentary.C.notestothefinancialstatements.7.Whattypeofauditopinionispreferredwhenanalyzingfinancialstatements?A.Qualified.B.Adverse.C.Unqualified.8.Ratiosareaninputintowhichstepinthefinancialstatementanalysisframework?A.Processdata.B.Collectinputdata.C.Analyze/interprettheprocesseddata.READING221.Whichofthefollowingitemswouldmostlikelybeclassifiedasanoperatingactivity?A.Issuanceofdebt.B.Acquisitionofacompetitor.C.Saleofautomobilesbyanautomobiledealer.2.Whichofthefollowingitemswouldmostlikelybeclassifiedasafinancingactivity?A.Issuanceofdebt.B.Paymentofincometaxes.C.Investmentsinthestockofasupplier.3.Whichofthefollowingelementsrepresentsaneconomicresource?A.Asset.B.Liability.C.Owners’equity.4.Whichofthefollowingelementsrepresentsaresidualclaim?A.Asset.B.Liability.C.Owners’equity.5.Ananalysthasprojectedthatacompanywillhaveassetsof€2,000atyear-endandliabilitiesof€1,200.Theanalyst’sprojectionoftotalowners’equityshouldbeclosestto:A.€800.B.€2,000.C.€3,200.6.Ananalysthascollectedthefollowinginformationregardingacompanyinadvanceofitsyearendearningsannouncement(inmillions):Estimatednetincome$200Beginningretainedearnings$1,400Estimateddistributionstoowners$100Theanalyst’sestimateofendingretainedearnings(inmillions)shouldbeclosestto:A.$1,300.B.$1,500.C.$1,700.7.AnanalysthascompiledthefollowinginformationregardingRubsam,Inc.Liabilitiesatyear-end€1,000Contributedcapitalatyear-end€500Beginningretainedearnings€600Revenueduringtheyear€5,000Expensesduringtheyear€4,300Therehavebeennodistributionstoowners.Theanalyst’smostlikelyestimateoftotalassetsatyear-endshouldbeclosestto:A.€2,100.B.€2,300.C.€2,800.8.Agroupofindividualsformedanewcompanywithaninvestmentof$500,000.Themostlikelyeffectofthistransactiononthecompany’saccountingequationatthetimeoftheformationisanincreaseincashand:A.anincreaseinrevenue.B.anincreaseinliabilities.C.anincreaseincontributedcapital.9.HVG,LLCpaid$12,000ofcashtoarealestatecompanyuponsigningaleaseon31December2005.Thepaymentrepresentsa$4,000securitydepositand$4,000ofrentforeachofJanuary2006andFebruary2006.AssumingthatthecorrectaccountingistoreflectbothJanuaryandFebruaryrentasprepaid,themostlikelyeffectonHVG’saccountingequationinDecember2005is:A.nonetchangeinassets.B.adecreaseinassetsof$8,000.C.adecreaseinassetsof$12,000.10.TRREnterprisessoldproductstocustomerson30June2006foratotalpriceof€10,000.Thetermsofthesalearethatpaymentisduein30days.Thecostoftheproductswas€8,000.ThemostlikelynetchangeinTRR’stotalassetson30June2006relatedtothistransactionis:A.€0.B.€2,000.C.€10,000.11.On30April2006,PintoProductsreceivedacashpaymentof$30,000asadepositonproductionofacustommachinetobedeliveredinAugust2006.Thistransactionwouldmostlikelyresultinwhichofthefollowingon30April2006?A.Noeffectonliabilities.B.Adecreaseinassetsof$30,000.C.Anincreaseinliabilitiesof$30,000.12.Squires&Johnson,Ltd.,recorded€250,000ofdepreciationexpenseinDecember2005.Themostlikelyeffectonthecompany’saccountingequationis:A.noeffectonassets.B.adecreaseinassetsof€250,000.C.anincreaseinliabilitiesof€250,000.13.Ananalystwhoisinterestedinassessingacompany’sfinancialpositionismostlikelytofocusonwhichfinancialstatement?A.Balancesheet.B.Incomestatement.C.Statementofcashflows.14.Thestatementofcashflowspresentstheflowsintowhichthreegroupsofbusinessactivities?A.Operating,Nonoperating,andFinancing.B.Operating,Investing,andFinancing.C.Operating,Nonoperating,andInvesting.15.Whichofthefollowingstatementsaboutcashreceivedpriortotherecognitionofrevenueinthefinancialstatementsismostaccurate?Thecashisrecordedas:A.deferredrevenue,anasset.B.accruedrevenue,aliability.C.deferredrevenue,aliability.16.When,attheendofanaccountingperiod,arevenuehasbeenrecognizedinthefinancialstatementsbutnobillinghasoccurredandnocashhasbeenreceived,theaccrualisto:A.unbilled(accrued)revenue,anasset.B.deferredrevenue,anasset.C.unbilled(accrued)revenue,aliability.17.When,attheendofanaccountingperiod,cashhasbeenpaidwithrespecttoanexpense,thebusinessshouldthenrecord:A.anaccruedexpense,anasset.B.aprepaidexpense,anasset.C.anaccruedexpense,aliability.18.When,attheendofanaccountingperiod,cashhasnotbeenpaidwithrespecttoanexpensethathasbe