A company's balance sheet reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is the company's stockholders' equity?

A) $800,000

B) $320,000

C) $1,000,000

D) $2,000,000

Answer: A

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

A) Treasury Stock.

B) Common Stock.

C) Sales Revenue.

D) Retained Earnings.

Answer: C

The times interest earned ratio is calculated as

A) Interest expense/Net income.

B) Net income/Interest expense.

C) (Net income + interest expense + tax expense)/Interest expense.

D) Interest expense/(Net income + interest expense + tax expense).

Answer: C

A debt security is transferred from one category to another. Generally acceptable accounting principles require that for this particular reclassification

A debt security is transferred from one category to another. Generally acceptable accounting principles require that for this particular reclassification (1) the security be transferred at fair value at the date of transfer, and (2) the unrealized gain or loss at the date of transfer currently carried as a separate component of stockholders' equity be amortized over the remaining life of the security. What type of transfer is being described?

a. Transfer from trading to available-for-sale
b. Transfer from available-for-sale to trading
c. Transfer from held-to-maturity to available-for-sale
d. Transfer from available-for-sale to held-to-maturity


Answer: Transfer from available-for-sale to held-to-maturity

When an investment in a held-to-maturity security is transferred to an available-for-sale security, the carrying value assigned to the available-for-sale security should be

a. its original cost.
b. its fair value at the date of the transfer.
c. the lower of its original cost or its fair value at the date of the transfer.
d. the higher of its original cost or its fair value at the date of the transfer.


Answer: its fair value at the date of the transfer

When an investment in an available-for-sale security is transferred to trading because the company anticipates selling the stock in the near future, the carrying value assigned to the investment upon entering it in the trading portfolio should be

a. its original cost.
b. its fair value at the date of the transfer.
c. the higher of its original cost or its fair value at the date of the transfer.
d. the lower of its original cost or its fair value at the date of the transfer.


Answer: its fair value at the date of the transfer