The primary goal of the consumer financial protection bureau is: a) to monitor your credit report and ensure your identity and other sensitive data has not been compromised. b) to protect against abusive or deceptive debt collection purposes. c) to protect consumers by regulating financial products and services. d) to protect consumers against false advertising and other unfair business practices.

The prescribed accounting treatment for stock dividends implicitly assumes that shareholders are fooled by small stock dividends and benefit by the market value of their additional shares. Explain this statement. Is it logical?

Cal Consulting follows the practice that prepayments are debited to expense when paid, and unearned revenues are credited to revenue when cash is received. Given this company’s accounting practices, which one of the following applies to the preparation of adjusting entries at the end of its first accounting period?

a. Unearned fees (on which cash was received in advance earlier in the period) are recorded with a debit to Consulting Fees Earned of $500 and a credit to Unearned Consulting Fees of$500.

Enter the letter A through H for the principle or assumption in the blank space next to each numbered description that it best reflects.

A. General accounting principle
B. Cost principle
C. Business entity assumption
D. Revenue recognition principle
E. Specific accounting principle F. Matching (expense recognition) principle G. Going-concern assumption
H. Full disclosure principle

_____6. Revenue is recorded when products and services are delivered.

Hatfield Industries is a large manufacturing conglomerate based in the United States with annual sales in excess of $300 million. Hatfield is currently under investigation by the Securities and Exchange Commission (SEC) for accounting irregularities and possible legal violations in the presentation of the company’s financial statements. A due-diligence team from the SEC has been sent to Hatfield’s corporate headquarters in Philadelphia for a complete audit in order to further assess the situation. Several unique circumstances at Hatfield are discovered by the SEC due-diligence team during the course of the investigation: - Management has been involved in ongoing negotiations with the local labor union, of which approximately 40% of its full-time labor force are members. Labor officials are seeking increased wages and pension benefits, which Hatfield’s management states is not possible at this time due to decreased profitability and a tight cash flow situation. Labor officials have accused Hatfield’s management of manipulating the company’s financial statements to justify not granting any concessions during the course of negotiations. - All new equipment obtained over the past several years has been established on Hatfield’s books as operating leases, although past acquisitions of similar equipment were nearly always classified as capital leases. Financial statements of industry peers indicate that capital leases for this type of equipment are the norm. The SEC wants Hatfield’s management to provide justification for this apparent deviation from “normal” accounting practices. - Inventory on Hatfield’s books has been steadily increasing for the past few years in comparison to sales growth. Management credits improved operating efficiencies in its production methods that have contributed to boosts in overall production. The SEC is seeking evidence that Hatfield somehow may have manipulated its inventory accounts. The SEC due-diligence team is not necessarily searching for evidence of fraud but of possible manipulation of accounting standards for the purpose of misleading shareholders and other interested parties. Initial review of Hatfield’s financial statements indicates that, at a minimum, certain practices have resulted in low-quality earnings. Labor officials believe that the management of Hatfield is attempting to understate its net income to avoid making any concessions in the labor negotiations. Which of the following actions by management will most likely result in low-quality earnings? a. Lengthening the life of a depreciable asset to lower the depreciation expense. b. Lowering the discount rate used in the valuation of the company’s pension obligations. c. The recognition of revenue at the time of delivery rather than when payment is received.

Which sentence best develops the topic sentence below?

Effective financial managers deserve to earn a high salary.

A $\space$ They spend all their time thinking about numbers.

B $\space$ Some live lavishly and have lots of expenses.

C $\space$ They make even more for their clients.

D $\space$ Every financial manager deserves to do well financially.

Why should caution be exercised in the use of the net income figure derived in an income statement? What are the objectives of generally accepted accounting principles in their application to the income statement?

Enter the letter A through H for the principle or assumption in the blank space next to each numbered description that it best reflects.

A. General accounting principle
B. Cost principle
C. Business entity assumption
D. Revenue recognition principle
E. Specific accounting principle F. Matching (expense recognition) principle G. Going-concern assumption
H. Full disclosure principle

_____3. A company records the expenses incurred to generate the revenues reported.

Enter the letter A through H for the principle or assumption in the blank space next to each numbered description that it best reflects.

A. General accounting principle
B. Cost principle
C. Business entity assumption
D. Revenue recognition principle
E. Specific accounting principle F. Matching (expense recognition) principle G. Going-concern assumption
H. Full disclosure principle

_____7. Usually created by a pronouncement from an authoritative body.

Which of the following statements is false?

A. Noncash activities should be reported in accrual basis financial statements.

B. Net cash flow from operating activities relates to normal business operations.

C. Net income usually equals net cash flow from operating activities.

D. The statement of cash flows is an essential part of the basic financial statements.

For each of the following, indicate if the statement reflects an input component, output component, or storage component of an accounting information system.

D. A list of the day’s cash and credit sales.

Accounting and Machiavellianism. Refer to the Behavioral Research in Accounting (January 2008) study of Machiavellian traits in accountants, Exercise $6.19$ (p. 317). A Mach rating score was determined for each in a random sample of 122 purchasing managers, with the following results: $\bar{x}=99.6, s=12.6$. Recall that a director of purchasing at a major firm claims that the true mean Mach rating score of all purchasing managers is 85. Find the value of the test statistic.

In a study of the influence of financial institutions on bond interest rates in Germany, quarterly data over a period of 12 years were analyzed. The postulated model was

$$y_i=\beta_0+\beta_1 x_{1 i}+\beta_2 x_{2 i}+\varepsilon_i$$

where

$y_i=$ change over the quarter in the bond interest rates

$x_{1 i}=$ change over the quarter in bond purchases by financial institutions

$x_{2 i}=$ change over the quarter in bond sales by financial institutions

The estimated regression coefficients were as follows:

$$b_1=0.057 \quad b_2=-0.065$$

Interpret these estimates.

Hawk Company records prepaid assets and unearned revenues in balance sheet accounts. The following information was used to prepare adjusting entries for the company as of August 31, the end of the company's fiscal year.

c. The company has earned $2,900 of its Unearned Service Fees account balance.

Prepare any necessary reversing entries for the accounting adjustments a through e assuming that the company uses reversing entries in its accounting system.