Financial Accounting
Which rate is used to calculate the interest to be paid on a bond?
COUPON
Wolverine Corporation issued 5,000 shares of its $5 par value common stock in payment for attorney services of $40,000. Wolverine stock has been actively trading at $20 per share. This transaction would include a:
Debit to Legal expense $40,000
A debit balance in Retained Earnings indicates that a company's lifetime earnings exceeded its lifetime losses and dividends issued.
FALSE
A high inventory turnover may indicate that a company is experiencing difficulty selling its inventory.
FALSE
Publicly traded companies have the option to produce audited financial statements.
FALSE
If stock is issued for an asset other than cash, the asset should be recorded on the books of the corporation at:
Fair Market Value
If $120,000 face value bonds are issued at 104, the proceeds received will be $104,000.
False
Which of the accounts below is usually NOT a liability?
Investment Bonds
What is a "going concern"?
It will continue in the future
Bonds payable
Long term liability
Earning per share is the amount of a company's net income per share of its
Outstanding Common Stock
If a corporation declares a $100,000 cash dividend, the account to be debited on the date of declaration is:
Retained Earnings
Why are audits required for publicly held corporations?
TO PROVIDE THE PUBLIC WITH ADDITIONAL ASSURANCE
The total stockholders' equity remains the same before and after a stock split.
TRUE
Who is the audit report addressed to?
The board of directors and the stockholders
A bond with a face value of $1,000 and a quoted price of 102 has a selling price of $1,020.
True
If the interest rate on a bond is 8% and the market interest rate is 7%, the bond will be issued at a price above the par value of the bond.
True
Treasury stock is a contra-stockholders' equity account.
True
Ratios that test liquidity include
acid test ratio, current ratio, working capital
The date when a cash dividend becomes a legal obligation is on the:
declaration date
: The purchase of treasury stock by a corporation increases total assets and stockholders' equity.
false
Horizontal analysis compares financial statement items in the current period with other items in the current period
false
Of the three types of business activities reported on a statement of cash flows, investing activities are the most important when evaluating a business.
false
The acid-test ratio reflects the company's percentage of total assets financed with total debt.
false
The purchase of treasury stock by a corporation increases total assets and stockholders' equity.
false
The purchase of treasury stock has the same effect of issuing stock.
false
Vertical analysis compares an item on the financial statement to the same item in a prior period.
false
When performing vertical analysis of an income statement, net income is usually used as the base.
false
The percentage change in financial statement balances is computed by dividing the dollar amount of the most recent period by the base period dollar amount.
false *divide CHANGE by base period amount*
The effect of the declaration of a cash dividend is a(n):
increase to liabilities and decrease to stockholders equity
Premium
market rate is higher than stated
Discount
market rate is less than stated
Which of the following is typically used as the base in a vertical analysis of an income statement?
net sales
Cash interest formula
par X coupon rate.
Par
stated rate=market rate
Semi Annually means
to divide by 2
Which of the following is typically used as the base in a vertical analysis of a balance sheet?
total assets
If the market interest rate is greater than the stated interest rate, the bonds will sell at a discount.
true
When comparing companies of different sizes, vertical analysis would be a useful tool.
true
coupon rate is the interest rate the bond pays in cash
true
market rate is the interest rate paid by others
true
