1. Which of the following entities appears not to be a going concern?
a. Company K’s management is unable to extend its long-term loan, and, given its losses in recent years, it is unlikely that it will be able to raise funds through other means to pay for the loan.
b. Company L’s management intends to liquidate the entity.
c. Company M’s management is being forced to cease the entity’s operations due to a major change in government policies.
d. None of the three companies is likely to be a going concern.

2. When the classification of items in its financial statements is changed, the entity:
a. Must not reclassify the comparative amounts unless absolutely necessary.
b. Must reclassify comparative amounts, unless it is impractical to do so.
c. Has an unrestricted choice whether to reclassify the comparative amount or not.
d. Must preserve consistency in reporting, and no new reclassification should be allowed.

3. An entity’s equity may decrease during a financial period because:
a. Other comprehensive income was lower than net profit.
b. There was a new share issuance.
c. Total comprehensive income was higher than net profit.
d. Prior-period errors resulted from overstatement of the previous year’s profits.

4. The notes to the accounts can be used for the following, except for:
a. Explaining why a certain accounting standard was not followed.
b. Providing disclosures of items not shown on the face of financial statements.
c. Providing additional breakdown of line items on the face of financial statements.
d. Explaining the accounting policies used.

Answer rating: 100% (QA)

1 Correct answer Option D None of the three companies is likely to be a going concern Company loses ... View the full answer