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INTERMEDIATE FINANCIAL
ACCOUNTING I FINAL EXAM PRACTICE
ONE SOLUTIONS Questions and Answers
(Expert Solutions)
Q: What information is included in the annual report letter written by managers of
publicly traded companies?, 🗹🗹: The annual report of a publicly traded entity must
include a letter from the firm's management that states its responsibilities for the
operations of the entity and the information contained in the financial statements,
including: designing and implementing internal controls relevant to the preparation and
fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Q: What do auditors attest to in a auditors report?, 🗹🗹: The audit report attests to
the fairness of the financial statements, not the annual report. The auditor, though,
verifies that the financial information in the annual report is not inconsistent with the
financial statements.
Q: Why are the notes to the financial statements an integral part of the financial
statements?, 🗹🗹: The notes (or footnotes) to the financial statements provide
descriptive information regarding a company's accounting policies, supplemental
disclosures of items not reported on the financial statements, and additional detail for
transactions reported on the four main financial statements. For example, a company
will disclose its depreciation policy for long-lived assets in its financial statement
footnotes. A company could also provide additional disclosures on the historical cost
and accumulated depreciation by significant types of assets. Notes to the financial
statements are typically extensive.
Q: Accounts payable is a, 🗹🗹: liability, (current liability)
Q: Trademark is an, 🗹🗹: noncurrent asset (intangible asset)
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Q: cash is an, 🗹🗹: asset (current)
Q: income tax payable is an, 🗹🗹: liability (current liability)
Q: tractors are an, 🗹🗹: asset (property, plant & equipment)
Q: common stock is, 🗹🗹: stockholders equity
Q: accounts receivable is an, 🗹🗹: current asset
Q: retained earnings is, 🗹🗹: stockholders equity
Q: The statement of financial position also called the ______________________________, lists an
entity's ___________, _______________, and ___________________________ as of a specific point in
time, 🗹🗹: balance sheet... assets, liabilities, and equity
Q: the balance sheet consists of __________, 🗹🗹: permanent accounts with cumulative
balances that company carries forward period to period over the life of the firm
Q: 3 things the balance sheet does...., 🗹🗹: 1. Summarizes the economic resources
obligations that impact the entity's ability to generate future cash flows
2. is useful in assessing an entity's rate of return on its investments when examined in
conjunction with the income statement
3. Aids in assessing the risk associated with a entity by providing inputs for cash flow
measures
Q: 3 common cash flow measures based on the balance sheet information are..., 🗹🗹:
1. liquidity
2. solvency
3. financial flexibility
INTERMEDIATE FINANCIAL
ACCOUNTING I FINAL EXAM PRACTICE
ONE SOLUTIONS Questions and Answers
(Expert Solutions)
Q: What information is included in the annual report letter written by managers of
publicly traded companies?, 🗹🗹: The annual report of a publicly traded entity must
include a letter from the firm's management that states its responsibilities for the
operations of the entity and the information contained in the financial statements,
including: designing and implementing internal controls relevant to the preparation and
fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the circumstances.
Q: What do auditors attest to in a auditors report?, 🗹🗹: The audit report attests to
the fairness of the financial statements, not the annual report. The auditor, though,
verifies that the financial information in the annual report is not inconsistent with the
financial statements.
Q: Why are the notes to the financial statements an integral part of the financial
statements?, 🗹🗹: The notes (or footnotes) to the financial statements provide
descriptive information regarding a company's accounting policies, supplemental
disclosures of items not reported on the financial statements, and additional detail for
transactions reported on the four main financial statements. For example, a company
will disclose its depreciation policy for long-lived assets in its financial statement
footnotes. A company could also provide additional disclosures on the historical cost
and accumulated depreciation by significant types of assets. Notes to the financial
statements are typically extensive.
Q: Accounts payable is a, 🗹🗹: liability, (current liability)
Q: Trademark is an, 🗹🗹: noncurrent asset (intangible asset)
, Page | 2
Q: cash is an, 🗹🗹: asset (current)
Q: income tax payable is an, 🗹🗹: liability (current liability)
Q: tractors are an, 🗹🗹: asset (property, plant & equipment)
Q: common stock is, 🗹🗹: stockholders equity
Q: accounts receivable is an, 🗹🗹: current asset
Q: retained earnings is, 🗹🗹: stockholders equity
Q: The statement of financial position also called the ______________________________, lists an
entity's ___________, _______________, and ___________________________ as of a specific point in
time, 🗹🗹: balance sheet... assets, liabilities, and equity
Q: the balance sheet consists of __________, 🗹🗹: permanent accounts with cumulative
balances that company carries forward period to period over the life of the firm
Q: 3 things the balance sheet does...., 🗹🗹: 1. Summarizes the economic resources
obligations that impact the entity's ability to generate future cash flows
2. is useful in assessing an entity's rate of return on its investments when examined in
conjunction with the income statement
3. Aids in assessing the risk associated with a entity by providing inputs for cash flow
measures
Q: 3 common cash flow measures based on the balance sheet information are..., 🗹🗹:
1. liquidity
2. solvency
3. financial flexibility
