1. Which of the following are attributes of a liability?

2. Which of the following should be reported on a year-end balance sheet under the heading of short-term debt?

3. A contingency is reported on the balance sheet as a liability if
a. it arises from a potential claim regarding damage to the environment.
b. a loss is probable and it can be reasonably estimated.
c. a lawsuit has been filed.
d. it involves a potential loss of a large amount of money.

4. The stockholders€™ equity section of Tarro Company€™s balance sheet includes the following selected information.
Common stock, $1 par, 15,000 shares authorized,
9,000 shares issued, 7,000 shares outstanding .... $ 27,000
Additional paid-in capital in excess of par value ..... 14,000
Retained earnings ................. (20,000)
Treasury stock
What is the correct balance of the common stock account?
a. $15,000
b. $11,000
c. $9,000
d. $7,000

5. A stockholder who owns 5% of the common stock of a corporation has a right to each of the following except
a. 5% of any dividends paid to common stockholders.
b. to cast votes on matters brought to stockholders for a vote.
c. to receive a dividend of 5% of net income for the current period.
d. to purchase 5% of any additional common stock issued by the company.

6. A corporation had retained earnings of $400,000 at December 31, 2004. Net income for 2005 was $175,000, and the company paid a cash dividend of $75,000. Also, the company repurchased shares of its stock during the year at a total cost of $50,000. The balance of retained earnings at December 31, 2005, would be
a. $450,000.
b. $550,000.
c. $575,000.
d. $500,000.

7. A corporation issued a 10% stock dividend during its 2005 fiscal year. The market value of the stock was $20 per share at the time the dividend was issued. One million shares of stock were outstanding. The par value of the stock was $1 per share. Which of the following correctly identifies the effect on the financial statements of this transaction?

8. Which of the following is not a true statement about preferred stock?
a. Preferred stockholders receive a current cash dividend before common stockholders do.
b. Preferred stockholders receive a stated dividend each year.
c. Preferred stock generally does not have voting privileges.
d. The cumulative feature serves to protect preferred stockholder interests.

9. The statement that €œdividends are not an expense€ is
a. always true.
b. never true.
c. sometimes true.
d. frequently true.

10. The presence of a foreign currency adjustment on the balance sheet means that
a. the company owns at least one foreign subsidiary.
b. the company€™s primary operations are located in a foreign country.
c. shares of the company€™s stock have been sold to foreign investors.
d. retained earnings of a foreign subsidiary have beenappropriated.

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Result from a Prior Transaction Yes Yes No No Involve a Promise to Convey Resources in the Future Yes No Yes No a. b. 0 d. 0 a. b. C. d. Wages Already Earned by Employees but Not Yet Paid Yes Yes No No 30-Year Debentures That Have Been Outstanding for 29 Years Yes No Yes No 0 Assets a. Increase b. No effect c. No effect d. No effect Equity Decrease Decrease No effect Decrease Net Income No effect No effect No effect Decrease