Accounting Exam #3 True/False
A callable bond allows the holder to repay the bonds before their scheduled maturity date at a specified call price
False
A company with a current ratio of 2.0 is considered more liquid than one with a current ratio of 3.0
False
A gain or loss is recorded on bonds retired at maturity
False
An increase in inventory represents an increase in cash
False
An increase in supplies represents an increase in cash
False
An increase in wages payable represents a decrease in cash
False
Common stock is listed before preferred stock in the balance sheet
False
Convertible bonds allow the borrower to convert each bond into a specified number of shares of common stock
False
Cumulative preferred stock means that dividends accumulate interest during the year
False
For accounting purposes, stated value is treated differently than par value
False
Gaines/losses on the early extinguishment of debt are reported as part of operating income in the income statement
False
Investing activities centers on the long-term assets shown on the balance sheet and does not include any short-term investments shown under current assets on the balance sheet
False
Profit margin and gross margin are the same thing
False
Purchases and sales of long-term investments for the period should be netted for disclosure in the investing activities section of the statement of cash flows
False
Stock splits and large stock dividends have the same effect on a company's retained earnings and total stockholder's equity
False
The CEO of a company is elected by a vote of the shareholders
False
The activity on the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only
False
The balance in the warranty liability account is always equal to warranty expense
False
The cash payment each period is calculated as the carrying value times the market rate
False
The income statement indicated a business's success or failure in earning an income from its operating activities, it also reflects the inflow and outflow of cash from operating activities
False
The mixture of debt and equity securities is generally the same for most companies
False
The purchase of long-term assets by issuing debt is recorded as both an investing activity and financing activity
False
The purchase of treasury stock represents an increase in cash
False
The word preferred in the phrase preferred stock means that an owner of preferred stock has some advantages over a bondholder
False
We can calculate the issue price of a bond as the face amount plus the total periodic interest payments
False
We record gain contingencies when the gain is probable and the amount is reasonably estimatable
False
We record interest expense in the period in which we pay it, rather than in the period we incur it
False
When presenting decreases in long-term investments in the investing activities section of the statement of cash flows, the amount reflected equals the amount of the gain or less from the transaction
False
The statement of cash flows explains the difference between net income as shown on the income statement and the net cash flows generated from operations
True
We report interest paid on bonds or notes payable in operating activities rather than financing activities
True
When bonds are called for retirement, any excess of the bonds' call price over the bonds' carrying value is reported as a loss on the income statement
True
Cash flow generally limits the amount of debt a business can finance
True
Contributed capital is the amount stockholders have invested in the company
True
If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value, a gain will result
True
A company credits Additional Paid-in-Capital for the portion of the cash proceeds above par value received for the issuance of stock
True
A debt to equity ratio of 1.0 means that half of the company's assets are financed by creditors
True
A decrease in accounts receivable represents a increase in cash
True
