6) T F "Gains' on the sale of treasury stock should be credited directly to retained earnings as an extraordinary item of income. 7) T F F The equity method of accounting should be used by a firm to report income from an investment in which it has a minority interest of more than 20% (of the investee company's voting common stock), unless the investor company does not exert significant influence over the financial and operating affairs of the investee company. 8) T F All subsidiaries (except for those where the parent company does not exert effective control, e.g., a subsidiary in bankruptcy) must be included in consolidated financial statements prepared by the parent company. 9) T F F In a defined contribution plan the beneficiary (retired employee) bears the risk of retirement benefits not being a specific amount but rather a function of the return on those investments during it's investment life. 10) T F For publicly traded companies, consolidated goodwill is not amortized, but must be written down if it has been impaired True False 1) TF The present value of future cash flows decreases when the appropriate rate of interest decreases. 2) T T F Stock splits and stock dividends have no net effect on a firm's cash flow. 3) TF If a company sells an issue of its own bonds payable at a premium, the effective yield (interest rate) of the issue is lower than the stated coupon rate. 4) T F If a company repurchases (in the market) its own issue of bonds payable prior to the issue's maturity date and pays more than its net book value, the effective yield (interest rate) in the market has increased since the date of issue. 5) ) T F Both finance leases and operating leases are accounted for as assets and liabilities on the balance sheet of the lessee