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Financial Reporting and Analysis: Using Financial Accounting Information

Charles H. Gibson

Chapter 2

Introduction to Financial Statements and Other Financial Reporting Topics - all with Video Answers

Educators

Chapter Questions

Problem 1

Name the type of opinion indicated by each of the following situations:
a. There is a material uncertainty.
b. There was a change in accounting principle.
c. There is no material scope limitation or material departure from GAAP.
d. The financial statements do not present fairly the financial position, results of operations, or cash flows of the entity in conformity with GAAP.
e. Except for the effects of the matter(s) to which the qualification relates, the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the entity, in conformity with GAAP.

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Problem 2

What are the roles of management and the auditor in the preparation and integrity of the financial statements?

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04:04

Problem 3

What is the purpose of the SEC's integrated disclosure system for financial reporting?

Tommy Nguyen
Tommy Nguyen
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Problem 4

Why do some unqualified opinions have explanatory paragraphs?

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Problem 5

Describe an auditor's review of financial statements.

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Problem 6

Will the accountant express an opinion on reviewed financial statements? Describe the accountant's report for reviewed financial statements.

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00:34

Problem 7

What type of opinion is expressed on a compilation?

Emily Terlap
Emily Terlap
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Problem 8

Are all financial statements presented with some kind of an accountant's report? Explain.

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Problem 9

What are the three principal financial statements of a corporation? Briefly describe the purpose of each statement.

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04:40

Problem 10

Why are notes to statements necessary?

Shazia Naz
Shazia Naz
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Problem 11

What are contingent liabilities? Are lawsuits against the firm contingent liabilities?

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Problem 12

Which of the following events, occurring subsequent to the balance sheet date, would require a note?
a. Major fire in one of the firm's plants
b. Increase in competitor's advertising
c. Purchase of another company
d. Introduction of new management techniques
e. Death of the corporate treasurer

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02:16

Problem 13

Describe a proxy statement.

Adam Conner
Adam Conner
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Problem 14

Briefly describe a summary annual report.

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01:19

Problem 15

If a company issues a summary annual report, where can the more extensive financial information be found?

Ameer Said
Ameer Said
Numerade Educator

Problem 16

Comment on the typical number of financial pages in a summary annual report as compared to a full annual report.

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Problem 17

What are the major sections of a statement of cash flows?

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Problem 18

Which two principal financial statements explain the difference between two balance sheet dates? Describe how these financial statements explain the difference between two balance sheet dates.

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Problem 19

What are the three major categories on a balance sheet?

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Problem 20

Can cash dividends be paid from retained earnings? Comment.

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04:40

Problem 21

Why should notes to financial statements be reviewed?

Shazia Naz
Shazia Naz
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Problem 22

Where do we find a description of a firm's accounting policies?

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Problem 23

Describe the relationship between the terms ethics and morals.

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Problem 24

What is the relationship between ethics and law?

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Problem 25

Identify the basic accounting equation.

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02:51

Problem 26

What is the relationship between the accounting equation and the double-entry system of recording transactions?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
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Problem 27

Define the following:
a. Permanent accounts
b. Temporary accounts

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Problem 28

A typical accrual recognition for salaries is as follows:
$$
\begin{array}{lr}
\text { Salaries Expense } & \$ 1,000 \text { (increase) } \\
\text { Salaries Payable } & 1,000 \text { (increase) }
\end{array}
$$
Explain how the matching concept applies in this situation.

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Problem 29

Why are adjusting entries necessary?

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Problem 30

Why aren't all transactions recorded in the general journal?

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Problem 31

The SEC released for public comment a proposed roadmap for adoption of IFRS by public companies in the United States. What were the serious concerns?

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Problem 32

Identify the usual forms of a business entity and describe the ownership characteristic of each.

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01:42

Problem 33

Why would the use of insider information be of concern if the market is efficient?

Jesse Neumann
Jesse Neumann
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Problem 34

Considering the EMH, it is best if financial disclosure is made in the body of the financial statements. Comment.

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Problem 36

Describe the purchase method of accounting for a business combination.

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Problem 37

Consolidated statements may be issued to show financial position as it would appear if two or more companies were one entity. What is the objective of these statements?

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Problem 38

What is the basic guideline for consolidation?

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Problem 39

Where must a company's code of ethics be made available?

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Problem 40

Describe the Treadway Commission.

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Problem 41

Why is the COSO report on internal control systems important under requirements of the Sarbanes-Oxley Act?

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Problem 42

Under Sarbanes-Oxley, the auditing firm will include which two reports with the audited statements? (Note: These two reports can be combined into one report.)

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Problem 43

Under Sarbanes-Oxley, management must include what report with the audited statements?

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Problem 44

Private companies are not under Sarbanes-Oxley. Why do some private companies follow the law?

Rashmi Sinha
Rashmi Sinha
Numerade Educator
01:42

Problem 45

Indicate the two approaches to presenting consolidated statements.

Jennifer Stoner
Jennifer Stoner
Numerade Educator

Problem 46

Describe how a company could be required to consolidate another company in which it has no or minor voting stock.

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02:33

Problem 47

Consolidation rules are similar between countries. Comment.

Danielle Ashley
Danielle Ashley
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Problem 48

Describe the filing deadline for Form I0-K.

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Problem 49

Describe the Norwalk Agreement.

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Problem 50

Comment on the impact on U.S. GAAP if the short-term convergence and the major topics are completed.

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Problem 51

The SEC announced that it would accept financial statements from private issuers without reconciliation to U.S. GAAP if they are prepared using IFRS, as issued by the International Accounting Standards Board. Comment on possible problems with this position.

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Problem 52

Professor Ball noted a number of problems with implementing IFRS. What were the problems noted by Professor Ball?

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01:02

Problem 354

Considering the $\mathrm{EMH}$, how could abnormal returns be achieved?

Harsh Gadhiya
Harsh Gadhiya
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