1. Which one of the following statements is correct?

A. FASB standards directly affect financial statements, notes to the financial statements, and managements discussion and analysis. B. In order to make adequate disclosure of related party transactions, companies should report the legal form, rather than the economic substance, of these transactions. C. If the loss on an account receivable results from a customers bankruptcy after the balance sheet date, but before issuance of the financial statements the company only discloses this information in the notes to the financial statements. D. Accounting policies are the specific accounting principles and methods a company uses and considers most appropriate to present fairly its financial statements.

2. Which one of the following statements is incorrect?

A. GAAP requires that general purpose financial statements include selected information on a single basis of segmentation. B. If 10 percent or more of company revenue is derived from a single customer, the company must disclose the total amount of revenue from each such customer by segment. C. In most situations, an auditor issues a qualified opinion or disclaims an opinion. D. Companies should generally use the same accounting principles for interim reports and for annual reports.

3. Which of the following should be disclosed in a Summary of Significant Accounting Policies? A. Types of executory contracts B. Amount for cumulative effect of change in accounting principle C. Claims of equity holders D. Depreciation method followed

4. Which of the following is not a characteristic that defines a reportable operating segment according to U.S. GAAP? A. Operating results are regularly reviewed by the enterprise's chief operating officer B. Discrete financial information is available. C. Engages in business activities from which it may recognize revenues and incur expenses. D. Represents more than 20% of total company revenues, assets, or net income.

5. An example of an inventory accounting policy that should be disclosed in a Summary of Significant Accounting Policies is the A. amount of income resulting from the involuntary liquidation of LIFO. B. major backlogs of inventory orders. C. method used for pricing inventory. D. separation of inventory into raw materials, work-in-process, and finished goods.

6. If a business entity entered into certain related party transactions, it would be required to disclose all of the following information except the A. nature of the relationship between the parties to the transactions. B. nature of any future transactions planned between the parties and the terms involved. C. dollar amount of the transactions for each of the periods for which an income state-ment is presented. D. amounts due from or to related parties as of the date of each balance sheet presented.

7. Events that occur after the December 31, 2021 balance sheet date, but before the balance sheet is issued, and provide additional evidence about conditions that existed at the balance sheet date and affect the realizability of accounts receivable should be A. discussed only in the MD&A (Management's Discussion and Analysis) section of the annual report. B. disclosed only in the Notes to the Financial Statements. C. used to record an adjustment to Bad Debt Expense for the year ending December 31, 2021 D. used to record an adjustment directly to the Retained Earnings account

8. Which of the following post-balance-sheet events would require adjustment of the accounts before issuance of the financial statements? A. Loss of plant as a result of fire B. Changes in the quoted market prices of securities held as an investment C. Loss on an uncollectible account receivable resulting from a customer's major flood loss D. Loss on a lawsuit, the outcome of which was deemed uncertain at year end.

9. An operating segment is a reportable segment if A. its operating profit is 10% or more of the combined operating profit of profitable segments. B. its operating loss is 10% or more of the combined operating losses of segments that incurred an operating loss. C. the absolute amount of its operating profit or loss is 10% or more of the company's combined operating profit or loss. D. None of these answers are correct.

10. If the financial statements examined by an auditor lead the auditor to issue an opinion that contains an exception that is not of sufficient magnitude to invalidate the statement as a whole, the opinion is said to be A. unqualified. B. qualified. C. adverse. D. exceptional.