1. The condition for bond issued at a premium is that the market rate is less than the effective interest rate of interest. (True/False)

2. A company uses the effective interest method of amortization for a bond issued as a premium. In the early years of the life of the bond, the interest expense will be less than the interest paid. In the later years of the bonds life, the interest expense will be greater than the interest paid. (True/False)

3. Cash dividends, stock dividends, property dividends and liquidating dividends all cause retained earnings to decrease. However, stock dividends and liquidating dividends do not meet the definition of a dividend. (True/False)

4. Stock dividends and stock splits are similar in that both do not change total stockholders equity. (True/False)

5. A company must accrue a liability for sick pay that accumulates but does not vest. (True/False)

6. A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to complete a refinancing. (True/False)

7. Federal income taxes should be included in an employers payroll tax expense. (True/False)