ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 3
QUIZ – NOTES TO FINANCIAL STATEMENTS (01)
Notes to Financial Statements
1. The presentation of the notes to financial statements in a systematic manner
a. is voluntary
b. depends on the industry
c. is elective
d. is compulsory, within reason
2. The following are methods of disclosing pertinent information in the financial statements, except
a. supporting schedules
b. confirmation letters
c. cross reference
d. none of these
3. The following are information that should be disclosed in the summary of significant accounting policies,
except
a. criteria for determining which investments are treated as cash equivalents
b. composition of property, plant and equipment
c. basis of profit recognition on long-term construction contracts
d. none of these
4. The following are examples of supporting schedules in the notes to financial statements, except
a. bank reconciliation statement
b. list of aged accounts receivable
c. itemization of fixed assets and their associated accumulated depreciation
d. components of the year-end inventories
Subsequent Events
5. When a subsequent event provides evidence about conditions that existed at the balance sheet date, which of
the following should be done?
a. Assign a specialist to deal with the event
b. Ensure that the financial statements are adjusted to reflect the information, including any necessary
footnote disclosures
c. Shop for an opinion that fits the desired type of event
d. Consult with the board about the merits and demerits of the event
6. Which of the following is the best example of an adjusting event?
a. A related party transaction occurs before the approval of the financial statements.
b. The company defaults on its line-of-credit with the bank subsequent to year-end but previous to the release
of the financial statements
c. Litigation that was accrued as a liability in the year being reported is settled subsequent to year-end for an
amount materially in excess of estimates
d. The company initiates an initial public offering subsequent to year-end
Accounting Changes
7. Accounting changes are often made even though in theory this may be a violation of the accounting concept
of
a. materiality
b. consistency
c. conservatism
d. objectivity
8. An adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of
an asset that results from the assessment of the present status of and expected future benefits and obligations
associated with assets and liabilities
a. change in accounting policy
b. change in accounting estimate
c. prior period adjustment
d. change in accounting principle
Related Party
9. The minimum disclosures about related party transactions include all of the following except
a. nature of the relationship
b. amount of the transaction
c. amount of outstanding balance
d. allowance for doubtful accounts related to the outstanding balance
Prior Period Adjustment
10.
I. Misinterpretation of facts is an example of error
II. Fraud is an example of error
a. only I is true
b. only II is true
c. both a and b are true
d. both a and b are false
