Chap012t
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Chap012t

Course Number: ACC 431, Spring 2011

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Chapter 12 - Financial Reporting and the Securities and Exchange Commission Chapter 12 Financial Reporting and the Securities and Exchange Commission Multiple Choice Questions 1. Which one of the following is not a division of the SEC? A. The Division of Corporation Finance. B. The Division of Investment Management. C. The Division of Compliance Information. D. The Division of Enforcement. E. The Division of...

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12 Chapter - Financial Reporting and the Securities and Exchange Commission Chapter 12 Financial Reporting and the Securities and Exchange Commission Multiple Choice Questions 1. Which one of the following is not a division of the SEC? A. The Division of Corporation Finance. B. The Division of Investment Management. C. The Division of Compliance Information. D. The Division of Enforcement. E. The Division of Trading and Markets. 2. The goals of the SEC include all except which one of the following? A. Prohibiting the dissemination of materially misstated information. B. Controlling the number of companies whose stock is listed on major stock exchanges. C. Regulating the operation of securities markets. D. Ensuring that full and fair information is disclosed to all investors before the securities of a company are allowed to be bought and sold. E. Preventing the misuse of information especially by inside parties. 3. Which one of the following Federal laws was enacted in 1935? A. Securities Act. B. Securities Exchange Act. C. Trust Indenture Act. D. Investment Company Act. E. Public Utility Holding Company Act. 4. Regulation S-K: A. controls the listing of securities by stock exchanges. B. establishes requirements for nonfinancial information to be filed with the SEC. C. prescribes the form of financial statements to be filed with the SEC. D. describes the internal controls a publicly traded company must maintain. E. prescribes the financial disclosure information that must be included in filings with the SEC. 12-1 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 5. Which of the following are issued by the SEC, as needed, to supplement Regulation S-X and Regulation S-K? A. SABs. B. ASRs. C. FRRs. D. ARBs. E. SRBs. 6. Regulation S-X specifies: A. requirements for the nonfinancial information to be filed with the SEC. B. which form a company must file to register new securities. C. that the financial statements included in a company's annual report must be audited. D. the form and content of financial statements to be filed with the SEC. E. the internal controls a publicly traded company must maintain. 7. Which one of the following forms is used when no other form is prescribed? A. S-4. B. S-3. C. S-11. D. S-8. E. S-1. 8. A wrap-around filing: A. may be used by large companies to sell securities over a period of two years without refiling with the SEC. B. is a simplified registration procedure for securities to be issued by small companies. C. allows a company to simplify its form 10-K by referring to information in its annual report. D. is a filing completed using the SEC's electronic filing system. E. may remain in effect for a period of one to five years. 12-2 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 9. Which one of the following registration statement forms is used by large issuers that already have at least $75 million voting stock held by nonaffiliates? A. S-11. B. S-3. C. S-8. D. S-4. E. S-1. 10. What is Form 10-K? A. A quarterly report filed with the SEC. B. An annual report filed with the SEC. C. A semiannual report filed with the SEC. D. A form filed with the SEC before the company issues stock for the first time. E. A form filed with the SEC before issuing stocks to acquire another company. 11. The prospectus part of a registration contains all except which of the following? A. Financial statements for the issuing company audited by an independent CPA along with appropriate supplementary data. B. An explanation of the intended use of the proceeds to be generated by the sale of the new securities. C. A description of the risks associated with the securities. D. A description of the business and the properties owned by the company. E. Additional data concerning expenses of issuance. 12. When must Form 8-K be filed with the SEC? A. Within forty-five days of the end of any quarter other than the fourth quarter of the fiscal year. B. Within ninety days of the end of the fiscal year. C. Within fifteen days of the occurrence of certain significant events. D. Within sixty days of the end of the fiscal year. E. When a relatively small company intends to issue securities. 12-3 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 13. Which of the following securities offerings is not exempt from registration prior to their sale? A. Offerings of more than $5 million. B. Securities issued by governments. C. Securities issued by banks. D. Securities issued by savings and loan associations. E. Offerings of no more than $1 million made to any number of investors within a 12-month period. 14. Lechter Co. is preparing to issue stock. Its revenues for last year were $85,000,000, and it had $52,000,000 in stock held by nonaffiliates. The company had been filing with the SEC for eight years. Which one of the following forms should have been used for registration? A. S-1. B. S-3. C. S-4. D. S-8. E. S-11. 15. Which one of the following is not a prescribed event for the filing of Form 8-K? A. Bankruptcy or receivership. B. Changes in control of the registrant. C. Resignation of a middle manager. D. Changes in the registrant's independent auditor. E. Acquisitions or dispositions of assets. 16. The SEC's operating costs are supported through A. tax revenues of the federal government. B. registration fees charged to issuers offering securities to the public. C. fees paid by stock exchanges. D. fees paid by stock brokers. E. fees paid by accounting firms that practice before the SEC. 12-4 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 17. A proxy statement must be filed with the SEC at least how many days before being distributed? A. 30. B. 60. C. 10. D. 90. E. 7. 18. The SEC has usually restricted its role in establishing accounting principles to A. specifying the information that should be included in interim financial statements. B. developing definitions of key accounting terms. C. developing accounting standards for particular industries. D. determining required disclosures. E. the promulgation and issuance of SASs (Securities Accounting Standards). 19. Information required in proxy statements includes all except which of the following? A. Listing of company directors and executive officers. B. Description of the business activities including principal products and sources and availability of raw materials. C. Market price of the company's common stock for each quarterly period within the two most recent fiscal years. D. Five-year summary of operations including sales, total assets, income from continuing operations, and cash dividends per share. E. Two-year summary of industry segments, export sales, and foreign and domestic operations. 20. A letter of comments would be issued by the SEC A. to request clarification of a registration statement. B. to convey your pertinent comments to the SEC. C. in response to a company's filing of Form 8-K. D. after receiving the company's Form 10-K. E. to indicate that a registration statement has been approved. 12-5 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 21. Which one of the following regulates the initial offering of securities by a company or underwriter? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Investment Advisers Act of 1940. E. The Sarbanes-Oxley Act of 2002. 22. Which one of the following regulates the subsequent trading of securities through brokers and exchanges? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Investment Advisers Act of 1940. E. The Sarbanes-Oxley Act of 2002. 23. Which one of the following requires the maintenance of accounting records and adequate internal accounting controls? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Foreign Corrupt Practices Act of 1977. E. The Sarbanes-Oxley Act of 2002. 24. Which one of the following is not a characteristic of the Public Company Accounting Oversight Board? A. Minimizes self-regulation in the accounting profession. B. Has the authority to amend, modify, repeal, or reject any audit standard of the ASB. C. Only one member can be an accountant, past or present. D. SEC has oversight and enforcement authority over the Board. E. Enforces auditing, quality control, and independence standards and rules. 12-6 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 25. Which statement is false regarding the registration of public accounting firms with the PCAOB under the Sarbanes-Oxley Act? A. Registration is required of all U.S. firms that prepare, issue, or participate in the preparation of an audit report for an entity that issues securities. B. Foreign accounting firms are exempt from registration. C. Disclosure requirements include annual fees received from each issuer for the firm's audit and nonaudit services. D. The Public Company Accounting Oversight Board subjects registered firms to periodic inspections. E. Information regarding disagreements between the issuer and the audit firm during the previous year must be disclosed. 26. What is the primary focus of the Sarbanes-Oxley Act? A. Accounting standards and the registration of securities. B. Regulation of the continuous reporting by publicly owned companies. C. Accounting standards and registration of investment companies that engage in investing and trading in securities. D. Accounting standards and penalties against persons who profit from illegal use of inside information. E. Regulation of independent audit firms and audit standards. 27. How has the SEC exercised its power with regard to the continuing evolution of accounting principles? 1. Issuing Financial Reporting Releases (FRRs). 2. Requiring additional disclosures in notes to financial statements. 3. Declaring a moratorium on the use of specified accounting practices. 4. Overruling the FASB. A. 1 and 4. B. 1, 3, and 4. C. 1 and 3. D. 1, 2, and 4. E. 1, 2, 3, and 4. 12-7 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 28. Which of the following is not a security as defined by the SEC? A. Accounts receivable. B. Notes receivable. C. Treasury stock. D. Debenture. E. Investment contract. 29. EDGAR stands for: A. Electronic Debits, Gains, Assets and Revenues System. B. Electronic Data Gathering, Analysis, and Retrieval System. C. Explanatory Data Gathering, Analysis, and Retrieval System. D. Explanatory Debits, Gains, Assets and Revenues System. E. Electronic Data, Gross Analysis, and Revenues System. 30. Filings with the SEC are divided generally into two broad categories: A. Registration statements and perpetual filings. B. Reconciliation statements and periodic filings. C. Registration statements and periodic filings. D. Registration filings and reconciliation statements. E. Reconciliation filings and perpetual filings. 31. What information needs to be included in Form 10-Q? 1. Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous year. 2. Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous two years. 3. A statement of cash flows is mandatory, but only for the year to date as well as for the corresponding period in the preceding year. 4. Two balance sheets: one for the end of the most recent quarter and one showing the company's financial position at the end of the previous fiscal year. A. 1 and 3. B. 2, 3, and 4. C. 1 and 2. D. 1, 3, and 4. E. 2 and 4. 12-8 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 32. What information is required in proxy statements? (1) Five-year summary of operations. (2) Five-year summary of industry segments. (3) Listing of company directors and executive officers. (4) Management discussion and analysis (MD&A). A. 1, 2 and 3. B. 2, 3 and 4. C. 1, 3 and 4. D. 1, 2 and 4. E. 1, 2, 3, and 4. 33. Which information is not contained in the prospectus of the registration statement? A. financial statements reviewed by an independent CPA. B. an explanation of the intended use of the proceeds. C. a description of the risks associated with the securities. D. a description of the business of the registrant. E. a description of the properties of the registrant. 34. What is shelf registration? A. A procedure that allows the sale of securities to a small group of knowledgeable investors without any general solicitation. B. A procedure that allows a company to register securities and then sell them over a period of two years without reregistering. C. A method of filing Form 10-K with the SEC. D. The registration of mutual funds that engage in investing and trading securities. E. The registration of securities issued in connection with business combination transactions. 35. What is private placement of securities? A. A procedure that allows a company to register securities and then sell them over a period of two years without reregistering. B. A procedure that allows the sale of securities to a small group of sophisticated knowledgeable investors, without any general solicitation. C. A method of filing Form 10-K with the SEC. D. the registration of mutual funds that engage in investing and trading securities. E. A sale of securities to 35 or fewer accredited investors. 12-9 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 36. What is the minimum net worth of those who are considered accredited investors? A. $200,000. B. $400,000. C. $500,000. D. $1,000,000. E. $2,000,000. 37. Which one of the following requires the audit committee to be responsible for the appointment and compensation of the external auditor? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Foreign Corrupt Practices Act of 1977. E. The Sarbanes-Oxley Act of 2002. 38. Which one of the following requires the registration of mutual funds that engage in investing and trading in securities? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Foreign Corrupt Practices Act of 1977. E. The Sarbanes-Oxley Act of 2002. 39. Which statement is false regarding the Public Company Accounting Oversight Board (PCAOB)? A. Regulates audit standards and independent audit firms. B. Has five members appointed by the SEC. C. Allows all members to be accountants, past or present. D. is under the oversight and enforcement of the SEC. E. is funded by fees levied on all publicly traded companies. 12-10 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 40. Which one of the following forms is used when companies have filed with the SEC for less than 36 months but are not large enough to file form S-3? A. S-1. B. S-4. C. S-11. D. S-8. E. S-3. 41. Which one of the following forms is used in connection with employee stock plans? A. S-8. B. S-3. C. S-4. D. S-1. E. S-11. 42. Which one of the following forms is used in connection with registration of securities of real estate companies? A. S-8. B. S-1. C. S-4. D. S-3. E. S-11. 43. Which one of the following forms is used in connection with registration of securities of a small reporting company with $25 million of annual revenues and of $25 million of voting securities held by nonaffiliates? A. S-8. B. S-11. C. S-4. D. S-1 E. S-3. 12-11 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 44. The SEC's role in the initial registration of securities to be publicly issued is: A. to ensure that the content of the registration filing is in compliance with securities regulations. B. to ensure that securities issued are quality investments. C. to provide data to the public regarding first-time issuance of securities. D. to give permission to an independent CPA firm to audit the registrant's financial statements. E. to make the registrant's annual report available for public viewing. 45. Audited financial statements in an annual report of an issuer that is subject to SEC regulation must include: A. three balance sheets, three income statements, and three statements of cash flows. B. three balance sheets, two income statements, and two statements of cash flows. C. one balance sheet, one income statement, and one statement of cash flows. D. two balance sheets, three income statements, and three statements of cash flows. E. two balance sheets, two income statements, and two statements of cash flows. 46. The audit committee of an entity subject to SEC regulation will do all of the following except: A. be responsible for agreeing to fee compensation of the independent audit firm. B. sign certification of the annual financial statements. C. be comprised only of individuals who are not members of management. D. approve nonaudit services provided by the independent audit firm. E. serve as liaison between the board of directors and the independent audit firm. 12-12 Chapter 12 - Financial Reporting and the Securities and Exchange Commission Matching Questions 47. For each of the following situations, select the best answer concerning information forms filed with the SEC: 1. Not required 2. Form 10K 3. Form 8-K 4. Form 8-K 5. Form 10K 6. Form 8-K 7. Form 8-K 8. Form 10Q 9. Not required 10. Form 10Q A unique or significant happening. ____ Annual information required by Regulation S-X. ____ Changes in control of the registrant. ____ Interim financial statements. ____ Fourth quarter income statement. Bankruptcy. Annual information required by Regulation S-K. Income statement for the current quarter, year-to-date, and comparative periods in the previous year. ____ ____ ____ ____ Changes in bookkeeping staff. ____ Changes in the registrant's external auditor. ____ Essay Questions 48. What is shelf registration? 49. What is a private placement of securities? 12-13 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 50. What are accredited investors? 51. What is a wrap-around filing? 52. What is included in Part I of a securities registration statement? 53. What is included in Part II of a securities registration statement? 12-14 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 54. What is blue sky legislation? 55. How are the operations of the SEC funded? 56. What was the purpose of the Securities Act of 1933? 57. What was the purpose of the Securities Exchange Act of 1934? 12-15 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 58. What is the purpose of the SEC's Regulation S-K? 59. Why is the SEC's Rule 14c-3 important to the accounting profession? 60. When is the SEC's Registration Form S-4 used? 61. When must Form 8-K be filed with the SEC? 12-16 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 62. Briefly describe Regulation S-K. What is its purpose? 63. What is a proxy? Briefly explain the importance of a proxy solicitation. 64. What are the responsibilities of the SEC's Division of Corporation Finance? 65. What are the four interconnected goals that the SEC has tried to achieve? 12-17 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 66. What is required by the Trust Indenture Act of 1939? 67. What information needs to be included in Form 10-Q? 68. What are some of the reasons for the corporate scandals of 2001 and 2002? 69. Why was the Public Utility Holding Company Act of 1935 created? 12-18 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 70. What information is required in proxy statements? 71. What Federal agency has Congressional responsibility to create auditing and accounting standards? 72. How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee? 73. What is the primary focus of the Sarbanes-Oxley Act of 2002? 12-19 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 74. Who has the responsibility for the evaluation of the quality of an investment? 75. Name the two broad categories of filings with the SEC. 76. Name five securities offerings exempt from registration with the SEC. 77. Describe the two parts of the SEC registration statement. 12-20 Chapter 12 - Financial Reporting and the Securities and Exchange Commission Chapter 12 Financial Reporting and the Securities and Exchange Commission Answer Key Multiple Choice Questions 1. Which one of the following is not a division of the SEC? A. The Division of Corporation Finance. B. The Division of Investment Management. C. The Division of Compliance Information. D. The Division of Enforcement. E. The Division of Trading and Markets. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-01 Understand the origin and expansive role of the Securities and Exchange Commission. 2. The goals of the SEC include all except which one of the following? A. Prohibiting the dissemination of materially misstated information. B. Controlling the number of companies whose stock is listed on major stock exchanges. C. Regulating the operation of securities markets. D. Ensuring that full and fair information is disclosed to all investors before the securities of a company are allowed to be bought and sold. E. Preventing the misuse of information especially by inside parties. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-21 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 3. Which one of the following Federal laws was enacted in 1935? A. Securities Act. B. Securities Exchange Act. C. Trust Indenture Act. D. Investment Company Act. E. Public Utility Holding Company Act. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 4. Regulation S-K: A. controls the listing of securities by stock exchanges. B. establishes requirements for nonfinancial information to be filed with the SEC. C. prescribes the form of financial statements to be filed with the SEC. D. describes the internal controls a publicly traded company must maintain. E. prescribes the financial disclosure information that must be included in filings with the SEC. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 5. Which of the following are issued by the SEC, as needed, to supplement Regulation S-X and Regulation S-K? A. SABs. B. ASRs. C. FRRs. D. ARBs. E. SRBs. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-04 Describe the SEC's role in establishing generally accepted accounting principles (GAAP). 12-22 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 6. Regulation S-X specifies: A. requirements for the nonfinancial information to be filed with the SEC. B. which form a company must file to register new securities. C. that the financial statements included in a company's annual report must be audited. D. the form and content of financial statements to be filed with the SEC. E. the internal controls a publicly traded company must maintain. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 7. Which one of the following forms is used when no other form is prescribed? A. S-4. B. S-3. C. S-11. D. S-8. E. S-1. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 8. A wrap-around filing: A. may be used by large companies to sell securities over a period of two years without refiling with the SEC. B. is a simplified registration procedure for securities to be issued by small companies. C. allows a company to simplify its form 10-K by referring to information in its annual report. D. is a filing completed using the SEC's electronic filing system. E. may remain in effect for a period of one to five years. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-23 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 9. Which one of the following registration statement forms is used by large issuers that already have at least $75 million voting stock held by nonaffiliates? A. S-11. B. S-3. C. S-8. D. S-4. E. S-1. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 10. What is Form 10-K? A. A quarterly report filed with the SEC. B. An annual report filed with the SEC. C. A semiannual report filed with the SEC. D. A form filed with the SEC before the company issues stock for the first time. E. A form filed with the SEC before issuing stocks to acquire another company. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-24 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 11. The prospectus part of a registration contains all except which of the following? A. Financial statements for the issuing company audited by an independent CPA along with appropriate supplementary data. B. An explanation of the intended use of the proceeds to be generated by the sale of the new securities. C. A description of the risks associated with the securities. D. A description of the business and the properties owned by the company. E. Additional data concerning expenses of issuance. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12. When must Form 8-K be filed with the SEC? A. Within forty-five days of the end of any quarter other than the fourth quarter of the fiscal year. B. Within ninety days of the end of the fiscal year. C. Within fifteen days of the occurrence of certain significant events. D. Within sixty days of the end of the fiscal year. E. When a relatively small company intends to issue securities. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-25 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 13. Which of the following securities offerings is not exempt from registration prior to their sale? A. Offerings of more than $5 million. B. Securities issued by governments. C. Securities issued by banks. D. Securities issued by savings and loan associations. E. Offerings of no more than $1 million made to any number of investors within a 12-month period. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 14. Lechter Co. is preparing to issue stock. Its revenues for last year were $85,000,000, and it had $52,000,000 in stock held by nonaffiliates. The company had been filing with the SEC for eight years. Which one of the following forms should have been used for registration? A. S-1. B. S-3. C. S-4. D. S-8. E. S-11. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Comprehension Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-26 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 15. Which one of the following is not a prescribed event for the filing of Form 8-K? A. Bankruptcy or receivership. B. Changes in control of the registrant. C. Resignation of a middle manager. D. Changes in the registrant's independent auditor. E. Acquisitions or dispositions of assets. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 16. The SEC's operating costs are supported through A. tax revenues of the federal government. B. registration fees charged to issuers offering securities to the public. C. fees paid by stock exchanges. D. fees paid by stock brokers. E. fees paid by accounting firms that practice before the SEC. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Comprehension Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 17. A proxy statement must be filed with the SEC at least how many days before being distributed? A. 30. B. 60. C. 10. D. 90. E. 7. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-27 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 18. The SEC has usually restricted its role in establishing accounting principles to A. specifying the information that should be included in interim financial statements. B. developing definitions of key accounting terms. C. developing accounting standards for particular industries. D. determining required disclosures. E. the promulgation and issuance of SASs (Securities Accounting Standards). AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-04 Describe the SEC's role in establishing generally accepted accounting principles (GAAP). 19. Information required in proxy statements includes all except which of the following? A. Listing of company directors and executive officers. B. Description of the business activities including principal products and sources and availability of raw materials. C. Market price of the company's common stock for each quarterly period within the two most recent fiscal years. D. Five-year summary of operations including sales, total assets, income from continuing operations, and cash dividends per share. E. Two-year summary of industry segments, export sales, and foreign and domestic operations. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-28 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 20. A letter of comments would be issued by the SEC A. to request clarification of a registration statement. B. to convey your pertinent comments to the SEC. C. in response to a company's filing of Form 8-K. D. after receiving the company's Form 10-K. E. to indicate that a registration statement has been approved. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 21. Which one of the following regulates the initial offering of securities by a company or underwriter? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Investment Advisers Act of 1940. E. The Sarbanes-Oxley Act of 2002. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-29 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 22. Which one of the following regulates the subsequent trading of securities through brokers and exchanges? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Investment Advisers Act of 1940. E. The Sarbanes-Oxley Act of 2002. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 23. Which one of the following requires the maintenance accounting of records and adequate internal accounting controls? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Foreign Corrupt Practices Act of 1977. E. The Sarbanes-Oxley Act of 2002. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-30 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 24. Which one of the following is not a characteristic of the Public Company Accounting Oversight Board? A. Minimizes self-regulation in the accounting profession. B. Has the authority to amend, modify, repeal, or reject any audit standard of the ASB. C. Only one member can be an accountant, past or present. D. SEC has oversight and enforcement authority over the Board. E. Enforces auditing, quality control, and independence standards and rules. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 25. Which statement is false regarding the registration of public accounting firms with the PCAOB under the Sarbanes-Oxley Act? A. Registration is required of all U.S. firms that prepare, issue, or participate in the preparation of an audit report for an entity that issues securities. B. Foreign accounting firms are exempt from registration. C. Disclosure requirements include annual fees received from each issuer for the firm's audit and nonaudit services. D. The Public Company Accounting Oversight Board subjects registered firms to periodic inspections. E. Information regarding disagreements between the issuer and the audit firm during the previous year must be disclosed. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 12-31 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 26. What is the primary focus of the Sarbanes-Oxley Act? A. Accounting standards and the registration of securities. B. Regulation of the continuous reporting by publicly owned companies. C. Accounting standards and registration of investment companies that engage in investing and trading in securities. D. Accounting standards and penalties against persons who profit from illegal use of inside information. E. Regulation of independent audit firms and audit standards. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 27. How has the SEC exercised its power with regard to the continuing evolution of accounting principles? 1. Issuing Financial Reporting Releases (FRRs). 2. Requiring additional disclosures in notes to financial statements. 3. Declaring a moratorium on the use of specified accounting practices. 4. Overruling the FASB. A. 1 and 4. B. 1, 3, and 4. C. 1 and 3. D. 1, 2, and 4. E. 1, 2, 3, and 4. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-04 Describe the SEC's role in establishing generally accepted accounting principles (GAAP). 12-32 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 28. Which of the following is not a security as defined by the SEC? A. Accounts receivable. B. Notes receivable. C. Treasury stock. D. Debenture. E. Investment contract. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 29. EDGAR stands for: A. Electronic Debits, Gains, Assets and Revenues System. B. Electronic Data Gathering, Analysis, and Retrieval System. C. Explanatory Data Gathering, Analysis, and Retrieval System. D. Explanatory Debits, Gains, Assets and Revenues System. E. Electronic Data, Gross Analysis, and Revenues System. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 30. Filings with the SEC are divided generally into two broad categories: A. Registration statements and perpetual filings. B. Reconciliation statements and periodic filings. C. Registration statements and periodic filings. D. Registration filings and reconciliation statements. E. Reconciliation filings and perpetual filings. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-33 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 31. What information needs to be included in Form 10-Q? 1. Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous year. 2. Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous two years. 3. A statement of cash flows is mandatory, but only for the year to date as well as for the corresponding period in the preceding year. 4. Two balance sheets: one for the end of the most recent quarter and one showing the company's financial position at the end of the previous fiscal year. A. 1 and 3. B. 2, 3, and 4. C. 1 and 2. D. 1, 3, and 4. E. 2 and 4. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 32. What information is required in proxy statements? (1) Five-year summary of operations. (2) Five-year summary of industry segments. (3) Listing of company directors and executive officers. (4) Management discussion and analysis (MD&A). A. 1, 2 and 3. B. 2, 3 and 4. C. 1, 3 and 4. D. 1, 2 and 4. E. 1, 2, 3, and 4. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-34 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 33. Which information is not contained in the prospectus of the registration statement? A. financial statements reviewed by an independent CPA. B. an explanation of the intended use of the proceeds. C. a description of the risks associated with the securities. D. a description of the business of the registrant. E. a description of the properties of the registrant. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 34. What is shelf registration? A. A procedure that allows the sale of securities to a small group of knowledgeable investors without any general solicitation. B. A procedure that allows a company to register securities and then sell them over a period of two years without reregistering. C. A method of filing Form 10-K with the SEC. D. The registration of mutual funds that engage in investing and trading securities. E. The registration of securities issued in connection with business combination transactions. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-35 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 35. What is private placement of securities? A. A procedure that allows a company to register securities and then sell them over a period of two years without reregistering. B. A procedure that allows the sale of securities to a small group of sophisticated knowledgeable investors, without any general solicitation. C. A method of filing Form 10-K with the SEC. D. the registration of mutual funds that engage in investing and trading securities. E. A sale of securities to 35 or fewer accredited investors. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 36. What is the minimum net worth of those who are considered accredited investors? A. $200,000. B. $400,000. C. $500,000. D. $1,000,000. E. $2,000,000. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-36 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 37. Which one of the following requires the audit committee to be responsible for the appointment and compensation of the external auditor? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Foreign Corrupt Practices Act of 1977. E. The Sarbanes-Oxley Act of 2002. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 38. Which one of the following requires the registration of mutual funds that engage in investing and trading in securities? A. The Securities Act of 1933. B. The Securities Exchange Act of 1934. C. The Investment Company Act of 1940. D. The Foreign Corrupt Practices Act of 1977. E. The Sarbanes-Oxley Act of 2002. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-37 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 39. Which statement is false regarding the Public Company Accounting Oversight Board (PCAOB)? A. Regulates audit standards and independent audit firms. B. Has five members appointed by the SEC. C. Allows all members to be accountants, past or present. D. is under the oversight and enforcement of the SEC. E. is funded by fees levied on all publicly traded companies. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 40. Which one of the following forms is used when companies have filed with the SEC for less than 36 months but are not large enough to file form S-3? A. S-1. B. S-4. C. S-11. D. S-8. E. S-3. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-38 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 41. Which one of the following forms is used in connection with employee stock plans? A. S-8. B. S-3. C. S-4. D. S-1. E. S-11. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 42. Which one of the following forms is used in connection with registration of securities of real estate companies? A. S-8. B. S-1. C. S-4. D. S-3. E. S-11. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-39 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 43. Which one of the following forms is used in connection with registration of securities of a small reporting company with $25 million of annual revenues and of $25 million of voting securities held by nonaffiliates? A. S-8. B. S-11. C. S-4. D. S-1 E. S-3. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 44. The SEC's role in the initial registration of securities to be publicly issued is: A. to ensure that the content of the registration filing is in compliance with securities regulations. B. to ensure that securities issued are quality investments. C. to provide data to the public regarding first-time issuance of securities. D. to give permission to an independent CPA firm to audit the registrant's financial statements. E. to make the registrant's annual report available for public viewing. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-40 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 45. Audited financial statements in an annual report of an issuer that is subject to SEC regulation must include: A. three balance sheets, three income statements, and three statements of cash flows. B. three balance sheets, two income statements, and two statements of cash flows. C. one balance sheet, one income statement, and one statement of cash flows. D. two balance sheets, three income statements, and three statements of cash flows. E. two balance sheets, two income statements, and two statements of cash flows. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 46. The audit committee of an entity subject to SEC regulation will do all of the following except: A. be responsible for agreeing to fee compensation of the independent audit firm. B. sign certification of the annual financial statements. C. be comprised only of individuals who are not members of management. D. approve nonaudit services provided by the independent audit firm. E. serve as liaison between the board of directors and the independent audit firm. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 12-41 Chapter 12 - Financial Reporting and the Securities and Exchange Commission Matching Questions 47. For each of the following situations, select the best answer concerning information forms filed with the SEC: 1. Not required 2. Form 10K 3. Form 8-K 4. Form 8-K 5. Form 10K 6. Form 8-K 7. Form 8-K 8. Form 10Q 9. Not required 10. Form 10Q A unique or significant happening. 3 Annual information required by Regulation S-X. 2 Changes in control of the registrant. 3 Interim financial statements. 8 Fourth quarter income statement. Bankruptcy. Annual information required by Regulation S-K. Income statement for the current quarter, year-to-date, and comparative periods in the previous year. 1 3 2 8 Changes in bookkeeping staff. 1 Changes in the registrant's external auditor. 3 AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. Essay Questions 48. What is shelf registration? Shelf registration is a procedure that allows a company to register securities and then sell them over a period of two years without reregistering. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-42 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 49. What is a private placement of securities? A private placement of securities is a sale of securities to a small group of sophisticated investors, knowledgeable and experienced in financial matters, without any general solicitation. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 50. What are accredited investors? Banks, insurance companies, and individuals with net worth in excess of $1 million are accredited investors. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 51. What is a wrap-around filing? A wrap-around filing is a method of filing Form 10-K with the SEC. The company files its annual report and uses incorporation by reference to meet many of the requirements of the SEC. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-43 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 52. What is included in Part I of a securities registration statement? Part I is a prospectus that includes audited financial statements, the intended use of the securities proceeds, a description of the risks associated with the securities, and a description of the business and properties owned by the registrant. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 53. What is included in Part II of a securities registration statement? Part II includes information that discloses issuance expenses, marketing arrangements, and other data that is only used by SEC staff in the registration process. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 54. What is blue sky legislation? Blue sky legislation represents state legislation that is intended to prevent securities fraud and to offer some protection to investors. These are for securities exempt from SEC registration because they are sold to residents of the state in which the issuing company is chartered and principally doing business. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-44 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 55. How are the operations of the SEC funded? The operations of the SEC are funded through registration fees charged to companies registering securities and for periodic filings. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 56. What was the purpose of the Securities Act of 1933? The purpose of the Securities Act of 1933 was to regulate initial offerings of securities by a company or underwriter. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 57. What was the purpose of the Securities Exchange Act of 1934? The purpose of the Securities Exchange Act of 1934 was to regulate the trading of previously issued securities through brokers and exchanges. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-45 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 58. What is the purpose of the SEC's Regulation S-K? Regulation S-K establishes requirements for nonfinancial information that is filed with the SEC. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 59. Why is the SEC's Rule 14c-3 important to the accounting profession? Rule 14c-3 is important to the accounting profession because it requires companies' financial statements that are included in annual reports to be audited. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Comprehension Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 60. When is the SEC's Registration Form S-4 used? Registration Form S-4 is used to register securities that are issued in connection with business combination transactions. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-46 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 61. When must Form 8-K be filed with the SEC? Form 8-K must be filed with the SEC whenever a significant event occurs. Significant events include: (1) a change in the company's independent auditor, (2) bankruptcy, and (3) a change in the control of the company. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 62. Briefly describe Regulation S-K. What is its purpose? Regulation S-K establishes requirements for the nonfinancial information included in filings with the SEC. The registrant must (1) describe its business, (2) provide data about directors and management, and (3) include a discussion by management of its current financial condition and the results of its operations. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-47 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 63. What is a proxy? Briefly explain the importance of a proxy solicitation. A proxy is a form signed by the shareholders giving someone else the legal authority to vote the shareholders' stock at a corporation's annual shareholders' meeting. Managers of a corporation usually solicit proxies to vote the stock of anyone unable to attend the annual meeting. Proxy solicitations are important because the decisions made at the annual shareholders' meeting are essential to operations of the business and there must be a voting quorum at the meeting in order to make such decisions. Proxy solicitations encourage shareholders to authorize their vote, even they can not be in attendance at the meeting, so that there will be a quorum. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 64. What are the responsibilities of the SEC's Division of Corporation Finance? The Division of Corporation Finance has responsibility for ensuring that disclosure requirements are met by publicly held companies. Such responsibility includes the reviewing of (1) registration statements, (2) tender offers, and (3) proxy materials, and (4) annual reports. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-48 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 65. What are the four interconnected goals that the SEC has tried to achieve? The four interconnected goals include: (1.) Ensuring that full and fair information is disclosed to all investors before the securities of a company are allowed to be bought and sold. (2.) Prohibiting the dissemination of materially misstated information. (3.) Preventing the misuse of information especially by inside parties. (4.) Regulating the operation of securities markets such as the New York Stock Exchange and the NASDAQ. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 66. What is required by the Trust Indenture Act of 1939? The Trust Indenture Act of 1939 requires the registration of trust indenture documents and supporting data in connection with the public sale of bonds, debentures, notes, and other debt securities. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-49 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 67. What information needs to be included in Form 10-Q? Information in Form 10-Q includes the following: (1.) Income statements for the most recent quarter and for the year to date as well as for the comparative periods in the previous year must be included. (2.) A statement of cash flows is mandatory, but only for the year to date as well as for the corresponding period in the preceding year. (3.) Two balance sheets are reported: one for the end of the most recent quarter with the second showing the company's financial position at the end of the previous fiscal year. (4.) Any needed disclosures need to be included pertaining to the current period including management's discussion and analysis (MD&A) of the financial condition of the company and the results of operations. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 68. What are some of the reasons for the corporate scandals of 2001 and 2002? (1) Greed by corporate executives; (2) a failure in the corporate governance process as practiced by many boards of directors;(3) failure of public accounting firms to apply appropriate quality control measures to ensure independent judgments; (4) deficiencies in self-regulatory standards of the accounting profession; (5) unreasonable market expectations; and (6) an overburdened SEC. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Comprehension Difficulty: Hard Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 12-50 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 69. Why was the Public Utility Holding Company Act of 1935 created? There were financial reporting abuses in the 1920s by complex utility empires. The owners of the empires minimized the need for equity financing. The Act requires registration of interstate holding companies of public utilities. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Hard Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 70. What information is required in proxy statements? (1) Five-year summary of operations; (2) description of business activities; (3) three-year summary of industry segments, export sales, and foreign and domestic operations; (4) listing of company directors and executive officers; (5) quarterly market price of the company's common stock; (6) dividend-paying restrictions; and (7) MD&A. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Hard Learning Objective: 12-02 Describe the purpose(s) of various U.S. security laws. 71. What Federal agency has Congressional responsibility to create auditing and accounting standards? The SEC. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. Learning Objective: 12-04 Describe the SEC's role in establishing generally accepted accounting principles (GAAP). 12-51 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 72. How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee? The audit committee is now responsible for the appointment and compensation of the external auditor. To ensure impartiality, the committee must be independent from management. The auditor reports directly to the audit committee. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Comprehension Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 73. What is the primary focus of the Sarbanes-Oxley Act of 2002? The regulation of audit standards and independent audit firms. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Medium Learning Objective: 12-03 Understand the congressional rationale for enacting the Sarbanes-Oxley Act and the responsibilities of the Public Accounting Oversight Board. 74. Who has the responsibility for the evaluation of the quality of an investment? The investor. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 12-52 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 75. Name the two broad categories of filings with the SEC. Registration statements and periodic filings. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Easy Learning Objective: 12-05 Define and describe an issuer's filings with the Securities and Exchange Commission. 76. Name five securities offerings exempt from registration with the SEC. (1) Securities sold to the residents of the state in which the issuer is chartered and doing business; (2) securities issued by governments, banks, and S&Ls; (3) securities restricted to a company's existing stockholders without commission; (4) securities issued by nonprofit organizations; (5) small offerings of no more than $5 million within a 12-month period; (6) offerings of no more than $1 million made to any number of investors within a 12-month period; (7) offerings of no more than $5 million made to 35 or fewer purchasers in a 12-month period; and/or (8) the private placement of securities to no more than 35 sophisticated investors. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Hard Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-53 Chapter 12 - Financial Reporting and the Securities and Exchange Commission 77. Describe the two parts of the SEC registration statement. Part I (the prospectus) contains extensive information including (1) financial statements audited by an independent CPA; (2) an explanation of the intended use of the proceeds; (3) a description of the risks associated with the securities; and (4) a description of the business and the properties of the company. Part II is primarily for the informational needs of the SEC staff. The registrant is not required to provide this information to prospective buyers, although the registration statement is a public document. Part II includes information such as marketing arrangements, and securities issue expenses. AACSB: Reflective thinking AICPA BB: Legal AICPA FN: Reporting Bloom's: Knowledge Difficulty: Hard Learning Objective: 12-06 Describe an issuer's registration process; various forms used by the issuers; and the exemption(s) from registration. 12-54

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National - ACC - 431
Chapter 13 - Accounting for Legal Reorganizations and LiquidationsCHAPTER 13ACCOUNTING FOR LEGAL REORGANIZATIONSAND LIQUIDATIONSChapter OutlineI.Because of a myriad of possible financial or business difficulties, a company may becomeinsolvent, unab
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Chapter 13 - Accounting for Legal Reorganizations and LiquidationsChapter 13Accounting for Legal Reorganizations and LiquidationsMultiple Choice Questions1. A Chapter 7 bankruptcy is a(n)A. involuntary reorganization.B. bankruptcy forced by a compan
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Chapter ThirteenAccounting forAccountingLegalReorganizationsand LiquidationsandMcGrawHill/IrwinCopyright2011byTheMcGrawHillCompanies,Inc.Allrightsreserved.-2BankruptcyA basic assumption ofaccounting is that a business isa going concern (will
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Chapter FourteenPartnerships:Partnerships:Formation andOperationsOperationsMcGrawHill/IrwinCopyright2011byTheMcGrawHillCompanies,Inc.Allrightsreserved.-2PartnershipsA partnership is defined as anassociation of two or more persons tocarry on a
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Chapter FifteenPartnerships:Termination andTerminationLiquidationLiquidationMcGrawHill/IrwinCopyright2011byTheMcGrawHillCompanies,Inc.Allrightsreserved.-2Reasons for TerminationPersonality disputes between partnersRetirementDeathChanged busin
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Chapter 01 - The Equity Method of Accounting for InvestmentsChapter 1The Equity Method Of Accounting For InvestmentsAnswers to Discussion QuestionsDiscussion questions are included within this textbook to stimulate student thought anddiscussion. Thes
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CHAPTER 2CONSOLIDATION OF FINANCIAL INFORMATIONAnswers to Acquisition Method Problems1.D2.B3.D4.B5.A6.A7.B8.C9.BConsideration transferred (fair value)Fair value of identifiable assets$800,0002-1CashA/RSoftwareIn-process R&DLia
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Chapter 04 - Consolidated Financial Statements and Outside OwnershipAnswers to Problems1. C2. D At the date control is obtained, the parent consolidates subsidiary assetsat fair value ($500,000 in this case) regardless of the parents percentageowners
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Chapter 05 - Consolidated Financial Statements Intra-Entity Asset TransactionsAnswers to Problems1. D2. B Inventory remaining $100,000 50% = $50,000 unrealized gross profit(based on Lee's gross profit rate as the seller) $50,000 40% = $20,000.The own
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Accounting 401Consolidation TheoriesThe first of the consolidation theories to be discussed below is the one we have been using forthis semester. It is also the theory that is being applied by companies on a day-to-day basis.The other theories are int
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Final Exam Study GuideHere is a list of the subjects that will be covered in Part 2 of the final exam:~ Explain and apply the "equity method of accounting" to appropriate acquisitions.~ Describe and apply the generally-accepted accounting principles re
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Student Name: 85 pointsClass: McGraw-Hill/IrwinProblem 10-31a. Translation of Kingston Subsidiary Trial BalanceCorrect! -Debits$12,96014,5804,860Correct! -8,100CashAccounts ReceivableEquipmentAccumulated DepreciationLandAccounts PayableNo
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Student Name:Class:Problem 10-31a. Translation of Kingston Subsidiary Trial BalanceDebitsCreditsExchangeRateDollarCashAccounts ReceivableEquipmentAccumulated DepreciationLandAccounts PayableNotes PayableCommon StockDividends PaidSalesSa
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Student Name:Class:Problem 02-19MARSHALL COMPANYPart a. Marshall and Tucker Consolidated BalancesMarshall's acquisition of Tucker represents a bargain purchasebecause the fair value of the net assets acquired exceeds thefair value of the considerat
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Updated Sixth EditionChapter 4Consolidated Financial Statement and Outside OwnershipChapter OutlineI.Consolidations Involving a Noncontrolling InterestA.In regard to any combination in which a noncontrolling interest remains, an fascinatingtheoret
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Meeting AnnouncementThe Accounting Circle at National University will behosting its fall meeting on October 3, 2011 at7:00pm PDT on a computer near you!The Accounting Circle provides students, alumni, faculty, and practitioners withtimely accounting
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Research Case StudiesAdvanced AccountingMisty BancroftAbbotts Acquisition of Advanced Medical Optics1. How did Abbott account for the Advanced Medical Optics acquisition?Abbott acquired Advanced Medical Optics on February 25, 2009. To record the acqui
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Student Name: InstructorClass: McGraw-Hill/IrwinProblem 02-19MARSHALL COMPANYPart a. Marshall and Tucker Consolidated BalancesMarshall's acquisition of Tucker represents a bargain purchasebecause the fair value of the net assets acquired exceeds the
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Student Name: Misty BancroftClass: ACC431-50375-1109Problem 02-19MARSHALL COMPANYPart a. Marshall and Tucker Consolidated BalancesMarshall's acquisition of Tucker represents a bargain purchasebecause the fair value of the net assets acquired exceeds
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Student Name:Class:Problem 04-32FATHER, INC. AND SAM CORPORATION- Purchase price allocation and annual amortizationAcquisition-date subsidiary fair valueBook value of subsidiaryFair value in excess of book value$850,000(600,000)250,000 Correct!
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Student Name:Class:Problem 05-32a. How was the balance in the Equity Earnings of Sander account determined?2011 income reported by SanderExcess patent fair value amortizationDeferred gross profit for 12/31/11 intra-entity inventoryRecognized gross
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Student Name:Class:Problem 10-31a. Translation of Kingston Subsidiary Trial BalanceCorrect! -Debits$12,96014,5804,860Correct! -8,100CashAccounts ReceivableEquipmentAccumulated DepreciationLandAccounts PayableNotes PayableCommon StockDiv
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1B2D3B4C5A6D7C8B9C10 B1B2C3D4C5D6C7B8B9A10 D1C2A3D4B5B
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Exam 1 EquationsFINA 3332Chapter 1Spring 2011Average Tax Rate = Total Tax DueTaxableIncomeNet Present ValuePresent Value of Future Cash Flows Present Value of Cash OutlaysChapter 5Chapter 2Compound InterestFVn = PV01+inAbnormal Return= Reali
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Exam 2 EquationsFINA 3332Chapter 5Spring 2011Relevant Risk: Systematic RiskCompounding more than one period a yeari=Covariancei,mVariancemFVn=PV1+inommmnEffective Rate of Interestieff=1+inommm-1Security Market Linekj=rf+jrm+rfAppendix 5aBeta
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FINA 3332Exam 2: Chapter ReviewSpring 2011Chapter 6: Analysis of Risk and Return Risko The possibility that actual returns, or cash flows, will be different from expectedreturnso Refers to the potential variability of returns from an asset or a por
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FINA 3332Exam 2: True/False QuestionsSpring 20111. The more frequent the compounding, the higher the effective rate of interest will be.2. Efficient portfolios lie on the efficient frontier and offer investors the highest possible expected rates ofre
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Exam3EquationsChapter8ZeroGrowthP0=DKeInternalEquity:CAPMMethodke=rf+rm+rfConstantGrowthP0=D1Ke-gBreakingPointBP=Retained EarningsWeNonConstant(multistage)GrowthWACC(ka)P0=t=1mDt1+kt+Dm+1Keg1+KemKa=wDKD1-t+wpKp+wreKre+wneKneChapter9NetAfter
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Final Exam FormulasExam 1oPerpetuityPV= PMTiHolding period Returno Ending Price - Beginning Price +DistributionsBeginning Pricex 100%o Distributions DividendsNumber of SharesooooFuture Value Simple InterestFV = PV1+inPresent Value of an An
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Exam 1 Perpetuityo PV= PMTio Type of Question: How much is the person willing to pay for an investment? Holding Period Returno Ending Price - Beginning Price + DistributionsBeginning Pricex 100%o Distributions DividendsNumber of Shares Future Val
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Test 1Finance 3332True/False Questions1.The value of PVIFA 0.14, 25 is 6.8729.2.The Euro refers to the deposit of foreign currency in a bank of a European country.3.The greater the risk of receiving future cash flows, the lower will be the present
U. Houston - MIS - 3300
Chapter5oVLOOKUPvalue,array,column,[range]ValueArrayColumnoooThedatayouwanttolookupTherangecontainingthedatathatyouwanttosearchtofindthelookupvalueThenumberofthecolumncontainingthedatayouwanttoretrieveooTypeoflookupyouwanttoperformTruegre
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Amulticoreprocessorcombinestwoormoreindependentprocessorsintoasinglecomputersotheycansharetheworkload.o Trueo FalseA(n)_isasetofcomputerprogramsthatcontrolthecomputerhardware,provideauserinterface,aswellas,managefiles,systemmemoryandprocessingtasks.
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Copyright 2006 John Wiley & Sons, Inc.BalancesShouldAgreeWeygandt/Financial Accounting 5e$ XXXXXLess:Charges recorded by bank butnot by business (e.g., servicecharges, NSF checks)Adjusted cash balance per booksXX$ XXXCash balance per booksAd
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Exam 3 ReviewACCT 3366Spring 2011Exam Date: Saturday, April 30, 2011 at 10:00amExam Makeup: 14 multiple-choice problems 6 work out problemsBring 4 Function Calculator and Wooden PencilChapters 5 and 6Chapter 5- Balance Sheet and Statement of Cash F
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Exam2FrameworksSpring2011Chapter3TheAccountingInformationSystem AccountingInformationSystemo Collectsandprocessestransactiondatao CommunicatesfinancialinformationtodecisionmakersAssetsLiabilitiesAssetDR.+=CR.LiabilitiesDR.CR.++ TheAccou
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FrameworksAccounting2011Exam1SpringChapterOneI.FinancialStatementsandFinancialReporting3CharacteristicsTheIdentification,measurement,andcommunicationoffinancialinformationEconomicentitiesInterestedpartiesFinancialReportingII.Theaccountingproc
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Cash and ReceivablesCASH AND CASH EQUIVALENTSCash on hand, demand deposits and other bank accounts are considered cash. Cash equivalentsare short-term investments (90 days or less) that can be converted into cash without anysignificant cost. There can
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Intermediate I Gleim Review Test 1[1]Zed Co. recorded a sale on May 1 for $6,000 and sales on May 9 and 10 for $9,000and $12,000, respectively. Zeds credit terms are 2/10, n/30. The payment on the $6,000sale was received May 10. The $12,000 sale was p
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Chapter 7Notes Receivable:oNote Issued at ParStated Rate = Market RatePresent Value of Note = Face Value of NoteCalculationsJournal EntryoFace ValueCR: CashPresent ValuePresent Value of Note > Face Value of NoteCalculationsPV of Note = Face
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Chapter 4: Activity-Based Costing Unit Level Product Costingo CHARTo Assigns only manufacturing costs to productso Assigning Direct Materials Cost and Direct Labor cost are not aproblem Directly Traceo Overhead cost Driver Tracing and Allocationo
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Chapter 4Activity Based Costing Stepso Activity Directory Activity Cost of Activity Activity Driver Quantityo Pool Rates Individual rates for each of the activities in the activitydirectory Cost of Activity Quantityo Product Directoryo Overhea
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RELS2310page1of5TheBibleandWesternCultureIReviewforMidTermExamFall20101. AccordingtotheBible,GodscovenantwithAbraham_.a. Wouldbeasourceofblessingsforallthenationsoftheworldb. Wouldbeasourceofblessingforallthenationsoftheworldc. Onlyinvolvesgodspro
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RELS 2310 Bible and Western Culture IPage 1Fall 2010Final Exam Review1. Prophets in the Hebrew Bible can be thought of as _ of the covenant.a. Doctorsb. Fortune tellersc. Lawyersd. Skeptics2. The prophets, according to Dr. Mitchell, say that most
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POLS1336Exam1ReviewFall2011 Whatisaconstitutiono GotitfromtheBritish? Beforeconstitutionsyouhavecovenantsandcharters Covenantisasolemnpledge Charterestablishessomesortoflegalauthority,relationshipororganizationo CharterswereusedtoorganizetheBritis
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PoliSci Test 2 Notes1Notes Civil Libertyo Not denied in the constitutiono Refers to political freedom Civil Righto Equality under the law Hobbesian Argumento In constitution there is specific limits placed on the states/congress, by doing thisyo
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Issues with the pressoFreedom from prior restraintoFreedom to gather newsoLibeloObscenity Freedom from prior restraintoCensorshipoGuaranteed by the first amendmentoDerived from English common lawoFreedom of pressoNear vs. Minnesota Ga
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Voting Rightso Left up to the states at the constitutional conventiono Only within the last 25 years that US reached an overwhelming consensus that every adult Americancitizen has right to voteo More amendments have been added to the constitution ext
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Political PartiesAre universalWere opposed by foundersFounded by foundersScholars prefer parties over groupsParties in the US-Party electorate (Citizens)*Studied at the micro levelIndividualsBest predictors are party IDGilligans Island Model
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Pluralismo Interest groups are goodo Why? Link between the public and government officials Serve an educational function Allow peoples views to be heard/seen without the people having toparticipate Government on automatic pilot All views are repr
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Exam2ReviewACCT2332Fall2011Chapter5o VariablecostOnlyvariableproductioncostsareincludedininventory:NetIncomeFixedproductioncostsaretreatedasperiodcostsSalesCogs=ContributionMargino ContributionMargin(FixedManufacturingOverhead+sellingexpense+Admi
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FALL 2010 A2332 Course Project28 points Due Monday Nov 29 (hand in to lab 133MH by 7PM)Cash budget, Income statement and performance report using a flexible budget.INSTRUCTIONS: Read the case and answer the requirements below. To receive fullcredit yo
U. Houston - ACCT - 2337
Managerial AccountingTest Chapter 1- 3 Questions Chapter 2- 10 Questions Chapter 3- 7 Questions Chapter 4- 10 QuestionsI.1Financial vs.ManagerialAccountingFinancial Accounting Outer Reports to owners,stockholders andcreditors Managerial Ac
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FinalExamReviewFall2010Chapter1 ManagerialAccountingo Reportstomanagersaboutperformancewithintheorganization YouGetwhatyoumeasureo Allyouaskforisallyoureceiveback TotalCost=FixedCost+(VariableCostxUnits)Chapter2 ManufacturingCosto DirectMaterial
U. Houston - HIST - 1377
1.SomehistorianshavearguedthattheCivilWarwasavoidablethata"blunderinggeneration"ofpoliticianshadampleopportunitiestopreventasectionalconflict,butfailedtodosoofincompetence,cowardice,orstupidity;thatthesepoliticianscreatedproblemsratherthansolvedthem.D
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Abraham Lincolns Changing Viewso 1854 Only a lawyer Knew northern people nor congress could do anything about slavery in theosouthern states America should respect the Fugitive Slave Act Criticized slavery Slaves should not be free and equal to r
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History 1336Fall 2010Exam 1 Note Outline August 24thI. European Voyagesa. Leif Ericsonb. Marco Poloc. Christopher ColumbusII. The first AmericansIII. Roanokea. Sir Walther Raleighb. CroatoansIII. Music & Architecture August 26th-Development o
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1I. European Voyages1. Leif Ericsona. Scandinavian explorer, Son of Eric the Redb. About 1000c. In the North Atlantic, From Greenland and sailed possibly as far south as CapeCodd. First to come to America that we can provee. Within a 100 years Nat
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1At the beginning of the fourteenth century Europeans took advantage of the new technologiesdeveloped, like the nautical advances. The Europeans were in search of riches and lands not already inthe hands of Christians, many were encountered accidentall
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History 1336Fall 2010Exam 2 Note Outline September 28th-The New NationI. Federalist & Anti Federalista) The Federalist Papersb) Anti FederalistII. The Washington Administrationa) Alexander Hamiltonb) Thomas JeffersonIII. Drift Toward Federalist