21. Financial statements are usually prepared before the closing entries are made.
22. Closing entries do not affect the cash account.
23. Return on equity is a commonly used measure of a company's solvency.
24. The current ratio is a measure of short-term debt paying ability.
25. An after-closing trial balance consists only of asset, liability, and owners' equity accounts.
26. IFRS 1 requires that management and auditors should depart from compliance with GAAP if it is necessary to achieve a fair presentation when reporting financial results.
27. An annual report filed with the Securities and Exchange Commission must include a section called "Management's Predictions of Future Earnings".
Multiple Choice Questions
28. Of the following, which is not an alternative title for the income statement?
A. Earnings statement
B. Statement of Operations
C. Profit and Loss Statement
D. Statement of Financial Position
29. The Retained Earnings statement is based upon which of the following relationships?
A. Retained Earnings - Net Income - Dividends
B. Retained Earnings - Net Income + Dividends
C. Retained Earnings + Net Income + Dividends
D. Retained Earnings + Net Income - Dividends
30. In the notes to financial statements, adequate disclosure would typically not include:
A. The accounting methods in use
B. Lawsuits pending against the business
C. Due dates of major liabilities
D. The optimism of the CFO regarding future profits.