FIN 320 FINAL EXAM QUESTIONS WITH VERIFIED
ANSWERS
By law, which agency/entity currently is responsible for establishing accounting
standards in the United States - Answers - SEC
Which agency/entity currently has the authority to issue auditing standards in the United
States - Answers - PCAOB
Who are the "Big Four" accounting firms - Answers - 1) Deloitte
2) Ernst and Young
3) KPMG
4) PricewaterhouseCoopers
The ability to continue to operate as is the past - Answers - operating capability
The ability to adapt to unforeseen events and opportunites - Answers - financial
flexibility
Under Sarbanes-Oxley who is held accountable for the fair presentation of the financial
statements and the integrity of the system of internal controls? - Answers - the CEO and
CFO
Relying on management to carry out the business on behalf of the owners is an
example of - Answers - moral hazard
Established a set of internal controls that is now required for publicly traded companies?
- Answers - Committee of Sponsoring Organizations of the Treadway Committee
Which report is filed when a company has an IPO - Answers - Report on Form S-1
In January a law firm enters into a contract to provide legal services and receives a
$10,000 retainer. In February the company provides the services. In march the firm
issues an invoice for the services totaling $36,000. The firm received payment in full in
April. Under accrual accounting when will the company record revenue? - Answers -
February
With regard to the statement of cash flows, which of the following is generally prepared
using the direct method - Answers - Investing and financing sections
Which of the following can be derived from Mike DeProspero "Cash Flow Profile?" -
Answers - Free cash flow and cash margin
, The equation: beginning balance + net income - dividends represents which financial
statement - Answers - Statement of changes in owners equity
Which of the following statements is most correct:
A)owners of a corporation can make money through dividends and/or stock appreciation
B) lenders would want the borrowers to take on more risk so as to enhance the lenders
return
C) the objective of the CFO of a company should be to maximize the company's stock
price
D) the Board of Directors are paid to oversee the day to day activities of the business -
Answers - A) owners of a corporation can make money through dividends and/or stock
appreciation
Which of the following transactions will result in a decrease in equity:
A) payment of cash dividends
B) acquisition of a business via the issuance of common stock
C) the purchase of inventory on account
D) the sale of product for less than the costs of goods sold - Answers - A) payment of
cash dividends
Which of the following would be recorded on the statement of changes in owners
equity?
A) Dividend income
B) Dividend expense
C) Dividends Declared
D) Dividends Paid - Answers - C) Dividends declared
Which of the following statements regarding cash basis and accrual basis accounting is
false?
A) cash basis is more accurate
B) cash basis requires less time to report
C) cash basis is the most reliable means of measuring value added
D) cash basis is easier to understand - Answers - C) cash basis is the most reliable
means of measuring value added
Which of the following is NOT a component of the Mike DeProspero "Cash Flow
Profile"?
A) Operating Cash Flows
B) Cash paid for Capital Expenditures
C) Cash paid for Interest
D) Cash paid for Dividends - Answers - C) Cash paid for Interest
ANSWERS
By law, which agency/entity currently is responsible for establishing accounting
standards in the United States - Answers - SEC
Which agency/entity currently has the authority to issue auditing standards in the United
States - Answers - PCAOB
Who are the "Big Four" accounting firms - Answers - 1) Deloitte
2) Ernst and Young
3) KPMG
4) PricewaterhouseCoopers
The ability to continue to operate as is the past - Answers - operating capability
The ability to adapt to unforeseen events and opportunites - Answers - financial
flexibility
Under Sarbanes-Oxley who is held accountable for the fair presentation of the financial
statements and the integrity of the system of internal controls? - Answers - the CEO and
CFO
Relying on management to carry out the business on behalf of the owners is an
example of - Answers - moral hazard
Established a set of internal controls that is now required for publicly traded companies?
- Answers - Committee of Sponsoring Organizations of the Treadway Committee
Which report is filed when a company has an IPO - Answers - Report on Form S-1
In January a law firm enters into a contract to provide legal services and receives a
$10,000 retainer. In February the company provides the services. In march the firm
issues an invoice for the services totaling $36,000. The firm received payment in full in
April. Under accrual accounting when will the company record revenue? - Answers -
February
With regard to the statement of cash flows, which of the following is generally prepared
using the direct method - Answers - Investing and financing sections
Which of the following can be derived from Mike DeProspero "Cash Flow Profile?" -
Answers - Free cash flow and cash margin
, The equation: beginning balance + net income - dividends represents which financial
statement - Answers - Statement of changes in owners equity
Which of the following statements is most correct:
A)owners of a corporation can make money through dividends and/or stock appreciation
B) lenders would want the borrowers to take on more risk so as to enhance the lenders
return
C) the objective of the CFO of a company should be to maximize the company's stock
price
D) the Board of Directors are paid to oversee the day to day activities of the business -
Answers - A) owners of a corporation can make money through dividends and/or stock
appreciation
Which of the following transactions will result in a decrease in equity:
A) payment of cash dividends
B) acquisition of a business via the issuance of common stock
C) the purchase of inventory on account
D) the sale of product for less than the costs of goods sold - Answers - A) payment of
cash dividends
Which of the following would be recorded on the statement of changes in owners
equity?
A) Dividend income
B) Dividend expense
C) Dividends Declared
D) Dividends Paid - Answers - C) Dividends declared
Which of the following statements regarding cash basis and accrual basis accounting is
false?
A) cash basis is more accurate
B) cash basis requires less time to report
C) cash basis is the most reliable means of measuring value added
D) cash basis is easier to understand - Answers - C) cash basis is the most reliable
means of measuring value added
Which of the following is NOT a component of the Mike DeProspero "Cash Flow
Profile"?
A) Operating Cash Flows
B) Cash paid for Capital Expenditures
C) Cash paid for Interest
D) Cash paid for Dividends - Answers - C) Cash paid for Interest
