Home->CPA

Larry the Lawyer is going to represent Bart's Brewskies in an upcoming litigation. Bart is being sued for representing his brewskies as being non-alcoholic, when in fact, they were 80-proof. Larry has asked Bart for a retainer of $1,000 before he'll even meet with Bart. Assuming the accrual basis of accounting is in play, that $1,000 is considered (for Larry): Mark one answer:

(A)Revenue and a receipt

(B)An accounts receivable

(C)A receipt

(D)Revenue

(E)An accounts payable

Jim's Jeans is being sued by a former employee for $100,000. The employee is claiming age discrimination. She is twenty-four and was terminated when Jim decided that he wanted all employees to be over the age of sixty-five. Jim's attorney has told him that the employee has a strong case and will probably win. How does this impact Jim's accounting records? Mark one answer:

(A)A note is made on the Balance Sheet regarding the lawsuit. (B)There is no impact on the financial statement unless the employee wins the suit. (C)A loss of $100,000 appears in the owner's equity section on the balance sheet. (D)An entry will appear on the statement of cash flows. (E)A contingent liability of $100,000 appears on the income statement as an expense.

Correct Answer: E

King, CPA, was engaged to audit the financial statements of Newton Company after its fiscal year had ended. King neither observed the inventory count nor confirmed the receivables by direct communication with debtors, but was satisfied concerning both after applying alternative procedures.King’s auditor’s report most likely contained a(n)

(A)Qualified opinion (B)Disclaimer of opinion. (C)Unmodified opinion. (D)Unmodified opinion with an other-matter paragraph.

Correct Answer: C

Cartman's Cats had a total of 100,000 shares of common stock issued. In February, they reacquired 20,000 shares and did not retire them. How many shares of outstanding stock do they currently have? Mark one answer:

(A)100,000 (B)120,000 (C)20,000 (D)60,000 (E)80,000

Correct Answer: E