5. Explain what the name the political cost hypothesis relates to in the earnings management literature.?

6. Given the following information:

Net Income $1,200,000

Preferred Stock, $100 par, 6%, 50,000 shares outstanding

Common Stock Outstanding, 100,000 shares (all year)

Total Common Dividends $200,000

Total Assets $10,000,000

Total Liabilities $3,000,000

Market Price Per Share $120

Calculate: (a) EPS (b) Dividend Yield (c) Market-to- Book Ratio (d) P/E ratio

7. What are the components of Comprehensive Income? What is the current treatment of Comprehensive Income and why?

8. What constitutes Extraordinary Items? What was the treatment of 9/11 losses regarding extraordinary items? Do you agree or disagree with this? What is the current treatment of extraordinary items?