TRUE or FALSE

TRUE/FALSE

     1.   The purpose of a balance sheet is to show the financial condition of an accounting entity for a period of time.

     2.   In a period of rising prices, LIFO usually results in a realistic cost of goods sold.

     3.   Generally accepted accounting principles and the Internal Revenue Code of tax law require that the same depreciation method be used for both the financial statements and the federal tax return.

     4.   All intangibles are amortized over their useful lives or their legal lives, whichever is shorter.

     5.   Deferred taxes are caused by using different accounting methods for tax and financial reporting purposes.

     6.   Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.

     7.   Minority interest reflects the ownership of minority shareholders in the equity of consolidated subsidiaries that are less than wholly owned.

     8.   The stockholders' equity section of the balance sheet includes redeemable preferred stock.

     9.   When a firm repurchases its own stock and retires it, the stock is called treasury stock.

   10.   A sole proprietorship form of business has only one owner.

   11.   The financial statements of legally separate entities may be issued to show the financial position and income as they would appear if the companies were one legal entity. Such statements reflect a legal, rather than an economic, concept of the entity.

   12.   Current assets are listed on the balance sheet in order of liquidity.

   13.   Long-term investments, usually stocks and bonds of other companies, are often held to maintain a business relationship or exercise control.

   14.   When preferred stock has a preference as to dividends, the current year's preferred dividend must be paid before a dividend can be paid to common stockholders.

   15.   If dividends are not declared by the board of directors in a particular year, a holder of cumulative preferred stock will never be paid that dividend.

   16.   Preferred stock usually has voting rights.

   17.   Warranty obligations are estimated in order to recognize the obligation at the balance sheet date and to charge the expense to the period of the sale.

   18.   Corporations do not use a standard title for owners' equity.

   19.   A quasi-reorganization is an accounting procedure equivalent to an accounting fresh start.

   20.   The principal financial statements are the balance sheet, income statement, and statement of cash flows.

   21.   The deferred compensation element of an equity-based deferred compensation arrangement is the amount of compensation cost deferred and amortized (expensed) to future periods as the services are provided.

   22.   An ESOP is a qualified stock-bonus or combination stock-bonus and money-purchase pension plan designed to invest primarily in stock, other than the employer's securities.

   23.   The Internal Revenue Code penalizes borrowing for an ESOP.

   24.   The balance sheet is presented with the assets equal to liabilities plus equity. When this presentation is presented side by side, it is called the account form.

   25.   The analyst must assume that securities classified as marketable securities are readily marketable.

   26.   There are many alternative titles for the statement of stockholders’ equity. The most frequently used alternative title is the statement of shareholders’ equity.

   27.   When the bond market interest rate is 6% and the bond contractual interest rate is 8%, the bond will sell at a premium.

28.     Noncontrolling interest reflects the ownership of noncontrolling shareholders in the equity of consolidated subsidiaries less than wholly occurred.

29.     Noncontrolling interest should be presented at the bottom of stockholders equity.

30.     IFRS require a standard format for the balance sheet.

31.     Using IFRS, usually noncurrent assets are presented first, followed by current assets.

32.     Under IFRS, reserves may result from upward revaluations of properties and investments.