Accounting Exam 2 Chapter 5 - 9
if a company has to change an estimate, such as the salvage value of an asset, the company is required to reassure prior year statements that were based on the estimate
false
the number of shares a corporation has outstanding may exceed the number of shared authorized is
false
which is normally has an associated contra account
tangible long-term assets
the company's return on equity (ROE) was higher than its return on investment (ROI), what would have caused this difference
the company's ROI was higher than its cost of debt
which is normally included in the description of cumulative preferred stock when shown in the stockholders equity section of the balance sheet
the par value of the stock, the number of shares authorized, issued and outstanding, the amount of dividend
Horizontal analysis compares financial statement data across two or more accounting periods, this statement is
true
Ratio analysis is used to access a company's profitability
true
a company that does not have enough assets to pay its liabilities is insolvent, this statement is
true
a franchise is an intangible asset that provides privileges related to other intangible assets
true
accrued interest expense will appear on the income statement but not on the statement of cash flows
true
treasury stock is listed as the first account under the stockholders equity section of the balance sheet, this statement is
false
common stock holders experience:
greater risk and greater potential rewards than preferred stockholders
the aging method of estimating collectible accounts method is based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected
true
the higher a company plant assets to long term liabilities ratio, the greater its borrowing capacity, this is....
true
the length of an operating cycle is the time it takes to turn cash into inventory, then inventory into accounts receivable, and then accounts receivable back into cash
true
Accrued interest revenue will appear on the income statement but not on the statement of cash flows
True
Under the allowance method the uncollectible accounts expense is
estimated and recognized at the end of the accounting period
a current asset is an asset that is cash or an asset that will be converted into cash within one year or one operating cycle whichever is shorter
false
the stated rate of interest and the effective rate of interest are synonymous terms
false
which of the following entities receives cash when a company borrows money through a bond issue
issuer
the recovery and collection of an account receivable that had previously been written off will
not affect total assets
which is an intangible asset
patent, copyright, trademark
which is a reason a company would acquire treasury stock
reduce the likelihood of a hostile takeover
which is NOT a potential benefit from owning common stock
risk minimization
A corporation may have issued more shares of stock than it has outstanding, this statement is
true
Land is different from other tangible assets in that its utility is not diminished by its use
true
Percentage analysis sidesteps the materiality problems of comparing different size companies by measuring changes in percentages rather than absolute amounts
true
in a business organized as a sole proprietorship, retained earnings and capital acquired from owners are combined is a single account
true
investors can benefit from investments in stock via increases in the market price of the stock or through the receipt of dividends, this statement is
true
the pricing earnings ratio (P/E ratio) is a measure of how much it costs to buy the earnings of a company, this statement is
true
which is not a common characteristic associated with preferred stock
voting rights
what are commonly used to measure liquidity
working capital current and quick ratios accounts receivable turnover ratio inventory turnover ratio
which is NOT a stock market ratio
working capital investment
The balance in the allowance for doubtful accounts provides an estimate of the amount of accounts receivable that is expected to be uncollectible
True
The net realizable value of accounts receivable represents an estimate of the amount of the accounts receivable that a company realistically expects to collect
True
which of the following is not a date associated with the declaration and payment of dividends
date of purchase
like sole proprietorships, partnerships maintain a single capital account in the accounting records, this is ...
false
both bonds payable and notes payable are obligations that usually arise from borrowing money
true
an aging schedule is used to improve the estimate used in the percent of revenue method of determine the uncollectible accounts expense
False
Most companies expect to college the full balance of all of their accounts receivable
False
Which of the following cost flow methods would prove the lowest taxable income in an inflationary environment
LIFO
under the allowance method, recognizing the write off of an uncollectible account receivable will
NOT affect the total amount of the net realizable value of receivables
which was the first required corporations to file quarterly and annual financial statements that are prepared in accordance with Generally Accepted Accounting Standards
Securities Act of 1934
a low price to earnings ratio suggests that:
a companys future earnings are expected to increase (most likely)
capitalizing the cash cost of a piece of equipment is
an asset exchange event
which would most likely not appear in the current liabilities section of a classified balance sheet
bonds payable
which of the following is not a tangible asset
copyright
what would appear on a classified balance sheet
current retained earnings
Which is a disadvantage of a corporate form of business
double taxation
a two for one stock split will double the amount of total stockholder's equity shown on the balance sheet, this statement is
false
all costs associated with a machine after it is operational are expensed in the period they are incurred
false
if a corporation sells treasury stock for more than it paid to acquire the stock, it will record a gain that will be shown in the non operating section of the income statement, this statement is
false
it is easier to acquire influential control in a company that has closely held stock ownership than in a company that has widely held stock ownership, this statement is
false
on the balance sheet, paid-in excess accounts are normally shown after the retained earnings account
false
paying cash to settle a previously declared dividend will reduce the balance of the retained earnings account, this statement is
false
profitable ratios are prepared by company employees for internal use only, this statement is
false
the amount of depletion expense is accumulated in a contra assets account at the end of each accounting period
false
the book value per share of stock is the amount of money an investor would have to pay to purchase a share of stock in an open market, this statement is
false
a company's profitability may suffer from holding too much working capital, this statement is
true
all common stockholders have the same rights and privileges, this statement is
true
all other things being equal, the higher a company's net margin, the better its performance, this statement is
true
all other things being equal, the lower a company's debt to assets or debt to equality ratios, the greater its borrowing capacity is....
true
amortizing a bond premium decreases the amount of interest expense from the stated rate of interest to the effective rate of interest
true
appropriating retained earnings reduces the amount of retained earnings theater available for the declaration of dividends, this statement is
true
if investors require more interest than the rate of interest stated in a bond, the bond must be sold at a discount in order to motivate the investor to purchase the bond
true
if the stated rate of interest of a bond is higher than the rate of interest paid on other bonds of equal risk, the bond will sell for more than face value
true
liquidity ratios are used to measure a company's ability to pay its current obligations
true
solvency ratios are used to measure a company's ability to pay its total obligations
true
the market price of common stock is based on investors expectations about future earnings, this statement is
true
the market price per share of stock normally declines when a corporation issues a stock dividend, this statement is
true
two companies that experience identical accounting events may still report different amounts of net income
true
