Introduction to Auditing and Accounting

In the annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results?

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

The net income reported by Johnny’s Car Repair Shop for the year was:

The purchase of an office building by issuing long-term notes payable should be reported as a:

If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000, the amount of net income or net loss for the period was:

The deferred income tax liability:

Calculate the value of inventory at the lower of cost or market given the following: current inventory consists of 200 units purchased at $16 per unit, replacement cost is now $13 per unit.

A measure of profitability is the:

Working capital is a measure of:

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed:

What would be the depreciation expense for the second year of its useful life using the double-declining-balance method?

Which of the following is not an activity listed in the statement of cash flows?

Net present value is negative when:

Auditing Reports

An auditor's report is where a reader can find out if a company's financial statements give a fair depiction of its financial position and operating results.

Accounting Assumptions

The going concern assumption assumes that an enterprise will continue to operate long enough to carry out its existing objectives and commitments.

### Johnny's Car Repair Shop

Total revenue is $100,000
Expenses are $55,000
Net income is 45,000(45,000 (45,000(100,000 - $55,000)

Office Building Purchase

The purchase of an office building by issuing long-term notes payable should be classified as a noncash investing and financing activity.

Capital Changes

The ending capital is $37,000
The owner's withdrawals are $23,000
Beginning capital is $25,000
Net income for the period is 14,000(14,000 (14,000(37,000 - 25,000+25,000 + 25,000+23,000)

Deferred Income Tax Liability

Represents income tax payments that are deferred until future years.
Occurs due to temporary differences between GAAP rules and tax accounting rules.

Inventory Lower of Cost or Market

The value of inventory at the lower of cost or market is $2,600.
The cost of the 200 units is 200 units * 16=16 = 16=3,200.
The market value of the 200 units is 200 units * 13=13 = 13=2,600.

Profitability Measures

The return on asset ratio measures profitability.

### Working Capital

Working capital is a measure of liquidity, which is the ability of a company to meet its short-term financial obligations.

Plant Asset Account

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed book value.

### POS Cash Register Depreciation

The useful life of the cash register is 10 years
The salvage value is $400
The depreciation expense for the second year using the double-declining-balance method is $864.

### Statement of Cash Flows

The statement of cash flows reports cash inflows and cash outflows.
The statement of cash flows includes investing, operating and financing activities.

### Net Present Value

Net present value is negative when the present value of cash outflows exceeds the present value of cash inflows.

This quiz covers key concepts in auditing reports and accounting assumptions. It includes practical examples such as revenue assessment, capital changes, and deferred income tax liabilities to ensure a solid understanding of financial statements. Test your knowledge on how these elements interact within a business context.