Question $6$:

D$)$ NET INCOME WILL DECREASE BY $ $15,000\mathrm{.}00.$

YOU LEARNED ON $1/28/2026,$ PRIOR TO COMPLETION OF THE AUDIT OF HEAVY DAMAGE BECAUSE OF A RECENT FIRE TO ONE OF ITS TWO PLANTS. THE LOSS WILL NOT BE REIMBURSED BY INSURANCE. YOUR COMPANY NEWSLETTER DESCRIBED THE EVENT IN DETAIL.

THE AUDITOR SHOULD DO THE FOLLOWING FOR THE CURRENT VEAR FINANCIAL STATEMENTS:

A$)$ THE COMPANY SHOULD MAKE AN ADJUSTMENT TO ITS FINANCIAL STATEMENTS.

B$)$ THERE WOULD NOT BE ANY NEED TO DISCLOSE THIS EVENT IN THE FOOTNOTES TO FINANCIAL STATEMENTS.

C$)$ THE LOSS SHOULD BE DISCLOSED IN FOOTNOTES TO FINANCIAL STATEMENTS.

D$)$ THE COMPANY SHOULD ADDRESS THIS EVENT IN THE NEXT PERIOD FINANCIAL STATEMENTS.

Question $7$:

The full disclosure principle, as adopted by the accounting profession, is best described by which of the following?

a$.$ All information related to an entity's business and operating objectives is required to be disclosed in the financial statements.

Information about each account balance appearing in the financial statements is to be included in the notes to the financial statements.

C$.$ Enough information should be disclosed in the financial statements so a person wishing to invest in the stock of the company can make a profitable decision.

D$.$ Disclosure of any financial facts significant enough to influence the judgment of an informed reader.

Question $8$:

Presented below is information related to Tolbert Company.

Current Assets

Cash $14,000$

Short term investments $75,000$

Accounts receivables $61,000$

Inventories $110,000$

Prepaid expenses $30,000$

Total current assets $290,000$

Total current liabilities are $$100,000.$ What is the acid$-$test ratio?

a$.2\mathrm{.}9$ to $1.\text{'}$

b$.2\mathrm{.}6$ to $1.$

C$\mathrm{.}1,5$ to $1,$

d$.0\mathrm{.}9$ to $1.$