1.

_____a) T or F: A business operation that is 1) organized according to state or federal statutes as a separate legal entity, and 2) ownership is divided into shares of stock is a corporation.

(If false, identify and correct the errors.)

_____ b) T or F: An external auditor, referred to as the Independent Registered Public Accounting Firm, must review the financial statements and internal controls of a publicly-held corporation. The corporation under review wants to receive an unqualified opinion on both reviews. (If false, identify and correct the errors.)

2.

_____a) T or F: Retained Earnings The beginning account balance is increased for Net Income and decreased for payment of dividends to arrive at the ending balance for the accounting period. (If false, identify and correct the error.)

_____b) T or F: The Income Statement summarizes: 1) assets; 2) liabilities and 3) stockholders equity as of a specific date. (If false, identify and correct the error.)

_____3. Huskie Company incurred a significant loss of property due to a natural disaster. The event occurred three weeks after the year-end reporting period, but prior to the issuance of the financial statements. This is an example of a:

a. Unfortunate event that should be disclosed in the notes to the financial statements.

b. Subsequent event that could be anticipated and financial statements should be adjusted prior to issuance.

c. Subsequent event that did not exist at the balance sheet reporting date and should be disclosed in the notes to the financial statements.

d. Subsequent event that does not need to be disclosed.

_____4. You are seeking funding to expand your fitness business and increase the number of customers you can serve each day. You have received funding (money) for your business from a bank. Next, you purchase additional fitness equipment such as treadmills. Consider the business activities cycle: which type of activity does each of these transactions represent?

a. Financing Activities / Fitness Activities

b. Investing Activities / Operating Activities

c. Financing Activities / Investing Activities

d. Operating Activities / Financing Activities

5. The following are accounts reported in the financial statements:

1. Balance Sheet
2. Income Statement
3. Statement of Stockholders Equity

1. Indicate where each of the following accounts is reported in the financial statements using the letters above. (Identify all reports that may apply for each item below.)

2. Identify if the account is permanent(P) or temporary (T).

Fill in list below for items I and II

_________Notes Payable

_________Unearned Subscription Revenues

_________Dividends

_________Wages Expense

_________Cost of Goods Sold

_________Retained Earnings

_________Prepaid Rent

_________Property, Plant & Equipment