2.

_____i. What is total Stockholders Equity based on the following account balances?

Paid in Capital:

Common Stock	$922,000
Paid-in-Capital in excess of par	9,243,000
Retained Earnings	20,875,000
Other Comprehensive Income	65,000
Treasury Stock	74,000

Total Stockholders Equity = ________________

_____ii. Treasury stock represents

1. Contra-equity account
2. The cost of company shares repurchased by the company
3. A reduction of stockholders equity
4. All of the above are both correct

3.

_____i. Bonds are popular source of financing because:

1. Financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issue of stock.
2. A company having cash flow problems can postpone payment of interest to bondholders.
3. Bond interest expense is deductible for tax purposes, while dividends paid on stock are not.
4. The bondholders can always convert their bonds into stock if they choose.

____ii. Assume bonds were issued during the month of September. When comparing the balance sheet for August 31 to September 30, if Total Assets increased by $428,000 and Total Liabilities increased by $250,000, then the change in Stockholders Equity would be _____________. (Identify amount and if it is an increase or decrease)

_____4. The time it takes McDonalds to purchase beef patties, cook and sell burgers, and collect cash from customers is known as the:

1. Accounting cycle
2. Financing cycle
3. Operating cycle
4. Investing cycle
5. Spin cycle

_____5. Which of the following is a current liability?

1. Prepaid insurance

2. Accounts receivable

3. Unearned subscription revenue

4. Rent revenue

5. Bonds payable

_____ 6. The Notes to the financial statements indicate the types of sales included in the receivables accounts along with the uncollectible amounts balance (Allowance for Doubtful Accounts).

1. T or F: If gross receivables are $225,000 and the allowance for doubtful accounts is 25,000, the Balance Sheet will indicate a line item for Receivables, net = $200,000.

2. The valuation method for receivables is called:

1. Fair value
2. Historical Cost
3. Net present value
4. Lower of cost or net realizable value (LCNRV)
5. Net realizable value