Question

Which type of set of financial statements is least likely to fairly represent a company’s financial position:

Audited financials

Reviewed financials

Compiled Financials

Cash received by a company prior to its delivery of goods to a customer is MOST LIKELY recorded when received as:

Deferred revenue, an asset

Deferred revenue, a liability

Sales, an income statement item

If a company records fictitious income, it most likely would try to cover up its fraud by:

Decreasing assets

Increasing expenses

Increasing liabilities

Creating one or more fictitious asset

Which of the following elements of financial statements is most closely related to the measurement of a company’s financial position?

Income

Expenses

Equity

Assuming total asset turnover is revenue divided by average total assets, impairment write downs of a company’s long-lived assets will MOST LIKELY result in an increase in the company’s:

Debt to equity ratio

Total asset turnover

Both total asset turnover and debt to equity ratio

A conversion of a face value $1 million convertible bond for $1 million of common stock would MOST LIKELY be:

Reported as a $1 million financing inflow

Reported as a $1 million financing outflow

Reported as a $1 million investing inflow

Reported as a $1 million investing outflow

Reported as a footnote to the financial statements

Answer 1

1. The following type of set of financial statements is least likely to fairly represent a company’s financial position:

  Compiled Financials.

With compilations, or compiled financial statements, the outside accountant converts the data provided by the client into financial statements without providing any assurances or auditing services.

2. Cash received by a company prior to its delivery of goods to a customer is MOST LIKELY recorded when received as:

  Deferred revenue, a liability

Till the time title of goods doesnot pass, its recorded as liability.

3. If a company records fictitious income, it most likely would try to cover up its fraud by:

  Creating one or more fictitious asset

4. The following elements of financial statements is most closely related to the measurement of a company’s financial position:

Equity