ANSWERS FOR THE FIVE PROBLEMS SHOULD BE PLACED ON THE SCANTRON PROVIDED. NOTE: Please use a #2 pencil. PROBLEM ONE - The following statements can either be true or false. Indicate your answer as A = True B = False 1. State and federal unemployment taxes are imposed on both employers and employees. 2. Dividends in arrears on cumulative preferred stock should be recorded as a current liability 3. The entry to record the collection of sales tax by a retailer may include credits to both Sales Revenue and Sales Tax Payable. 4. IFRS requires that the issuer of convertible debt record the liability and equity components separately. 5. The current ratio is defined as current liabilities divided by current assets. 6. When the effective rate of a bond is lower than the stated rate, the bond sells at a discount. Gains and losses on early extinguishment of debt are reported as other gains and losses on the income statement. & Treasury stock is classified on the balance sheet as an asset The par value of a share of common stock usually is a good indication of what the stock is worth on the market 10. Preferred stock has no voting rights. Nendetachable warrants do not require an allocation of the proceeds between the bonds and the warrants. 12. Earnings per share is reported for both common and preferred stock Ilarealized Holding Gain Loss - Equity account is reported as a part of other comprehensis income. 14. Trading securities are reported on the balance sheet at fair value Darmancat differences do not give rise to future taxable or deductible amounts ension plan assets are not recognized in the company's accounts or financial statemente statement of cash flows provides information not available from other financial statemente 17. The statement of cash repare the statement of cash flows, only comparative balance sheets and a current in 18. To prepare statement are needed. 19. The direct method is more consistent with the lect method is more consistent with the objective of the statement of cash flows because it hows operating receipts and payments where the indirect method does not der the accrual basis of accounting, net income is usually the same as net cash flow from operating activities