CHAPTER 10 - ACTIVITY

1. What are the relevant accounts related to debt obligations?

 Bonds payable
 Interest expense
 Gains or losses on refinancing debt
 Notes payable

2. What are the relevant accounts related to stockholder’s equity

transactions?

 Stock accounts (common, preferred, and treasury)

 Additional paid-in capital
 Dividend accounts
 Retained earnings
 Activities Related to Stockholders' Equity

3. Identify common transactions affecting stockholder’s equity

accounts.

 New stock issuance's

 Purchase of treasury stock
 Declaration and payment of dividends
 Grants of stock options and warrants
 Exercises and expirations of stock options and warrants
 Transfer of net income to retained earnings
 Recording of prior-period adjustments to retained earnings
4. Identify fraud risks associated with debt obligations.

 Debt obligations are not properly authorized

 Long-term or short-term debt is mis-classified
 Interest expense is recorded in the wrong period, at the wrong amount, not
recorded at all, or is mis-classified.
 Entire loan payments are charged to either principal or interest.

5. Identify fraud risks asscociated with stockholder’s equity accounts.

 Stock sales or issuances are not authorized.

 Stock sales or issuances violate debt covenants.
 Stock sales or issuances are not recorded.
 Stock options exercised are not authorized or are not in accordance with
the terms of options granted.
 Stock options are backdated.
 Dividends are paid in violation of restrictive covenants.
 Dividends are paid to wrong parties or at incorrect amounts.
 Proceeds from stock sales are misappropriated.