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Wall Street Prep My Courses The Premium Package Self-Study Courses Public Boot Camps Corporate Training On-Campus Training WSP Consulting Free Training & Articles The WSP Blog Support/Contact Us About Wall Street Prep Wall Street Prep Hi, Shuobo return icon Back to Exams Review: Accounting & Financial Statement Analysis Exam Score: 36%, 24 correct out of 66 | Taken On: 09-10-18 Question 1 The regulating body that oversees the development of accounting standards in the U.S. is: SFAS GAAP FASB IASB Your answer is correct. FASB formulates accounting standards through the issuance of Statements of Financial Accounting Standards (SFAS). These statements make up the body of accounting rules known as the Generally Accepted Accounting Principles (GAAP). IASB oversees international financial reporting standards (IFRS). See Lesson: Introduction Question 2 Which of the following statements is TRUE? GAAP requires that firms show recorded values for acquired intangible assets such as patents and trademarks on their financial statements GAAP requires that firms show recorded values for intangible assets such as employee and customer loyalty GAAP requires that financial statements accurately reflects the market value of internally-developed trademarks such as the value of the Coca-Cola brand name All of the above Your answer is incorrect. GAAP requires that firms only show measurable activities, such as the value of acquired intangible assets. Assets such as employee, customer loyalty and internally-developed trademarks are not shown on financial statements because they’re difficult to quantify. See Lesson: Basic Accounting Principles Question 3 Which of the following statements is TRUE? Publicly traded US companies are required to file four 10-Q's and one 10-K annually All US companies are required to file three 10-Q's and one 10-K annually Publicly traded US companies are required to file three 10-Q's and one 10-K annually Publicly traded US companies are required to file one 10-K annually; 10-Q's are typically filed but are technically voluntary Your answer is incorrect. Publicly-traded US companies must file three quarterly (10-Q) reports at the end of their 1Q, 2Q and 3Q, and a 10-K at the end of their fiscal year. See Lesson: Financial Reportings & Important Filings Question 4 The income statement is designed to measure: the liquidity of a firm how solvent a company has been the income position of a firm at a point in time Cash inflows/outflows generated over a period of time the accrual-based accounting profits of a firm over a period of time Your answer is correct. The income statement is designed to show the operations of the business (revenues and associated expenses). The balance sheet is designed to show a firm’s financial position, while the cash flow statement shows the amount of cash generated by a firm. See Lesson: Basic Accounting Principles Question 5 The Matching Principle states that: Costs associated with making a product must be recognized at the end of the production process Costs associated with making a product must be recognized immediately as incurred Costs associated with making a product must be recognized during the same period as revenue generated from that product Costs associated with making a product must be recorded during the same period as the sales, general, and administrative expenses that are also associated with the product Your answer is incorrect. Under the matching principle, costs associated with making a product must be recorded during the same period as revenue generated from that product. See Lesson: Basic Accounting Principles Question 6 During the current year, accounts receivable increased from $27,000 to $41,000 and sales were $225,000. Based on this information, how much cash did the company collect from its customers during the year? $239,000 $225,000 $211,000 $252,000 $266,000 Your answer is incorrect. Accounts receivable increased by $14,000, implying that the company did not collect that amount in cash, so cash sales were $225,000-$14,000 = $211,000.