QUESTION: 2101

The Income Statement:

reflects the current operating performance of the firm.
II. indicates whether the firm is healthy and growing or not.
III. explains the changes in assets, liabilities and Equity of the firm.
IV. is a snapshot of a firm's operations at a given time.
I, II, III & IV
II & III
I only
I & IV

Answer(s): C

Explanation:

II needs a cash flow statement, in addition. III is not true since the Income statement does not contain all the details which pertain to changes in assets and liabilities. Finally, an income statement shows the performance over a time period and is hence, not a "snapshot" of operations.

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QUESTION: 2102

Which of the following is not a common tool used in financial statement analysis?

trend series analysis
random walk analysis
common size statement analysis
ratio analysis

Answer(s): B

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QUESTION: 2103

Irwin Inc. has a self-insurance plan. Each year, retained earnings is appropriated for contingencies in an amount equal to insurance premiums saved minus recognized losses from lawsuits and other claims. As a result of a 1996 accident, Irwin is a defendant in a lawsuit in which it will probably have to pay damages of $190,000. What are the effects of this lawsuit's probable outcome on Irwin's 1996 financial statements?

An increase in expenses and no effect on liabilities.
No effect on expenses and an increase in liabilities.
An increase in both expenses and liabilities.
None of these answers.
No effect on either expenses nor liabilities.

Answer(s): C

Explanation:

Since the outcome of the lawsuit is probable and estimable, the amount of $190,000 will be recorded in the financial statements as a contingent liability and an expense.

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QUESTION: 2104

Which of the following best describes a balance sheet?

None of these answers.
A balance sheet reports changes over a period of time in component accounts that comprise the ownership of a firm.
A balance sheet summarizes the financial position of a company at a given point in time.
A balance sheet details the cash inflows and outflows that are related to a company's operating, investing, and financing activities over a period of time.
A balance sheet measures a company's financial performance over a specified period of time.

Answer(s): C

Explanation:

A balance sheet provides a detailed listing of a company's assets, liabilities, and equity at a point in time. This provides a glimpse at a company's financial condition.

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QUESTION: 2101

Explanation:

QUESTION: 2102

QUESTION: 2103

Explanation:

QUESTION: 2104

Explanation: