The Sarbanes-Oxley Act (SOX)
Chapter1: Comprehensive Cases
Section1.11: New Century Financial Corporation
Problem 3Q
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![The Sarbanes-Oxley Act (SOX) requires which of the following conditions or practices?
The CEO and CFO must also perform an audit of the financial statements.
All auditors must have a minimum of 20 years experience.
Management must take responsibility for establishing and maintaining adequate internal controls.
Auditors must be employees of the company they are auditing.
Which of the following options is true for a classified balance sheet?
Is the same as an unclassified balance sheet
Reports current and noncurrent retained earnings
Orders assets based on liquidity
Classifies common stock into current and long-term
Assume a company has the following information:
Note Payable: $200,000
Interest Rate: 6%
Issue Date: May 1, Year 1
Year-end: December 31, Year 1
Maturity: January 31, Year 2
Which of the following options will the journal entry on the note's maturity date include?
A debit to Interest Expense for $12,000
A credit to Notes Payable for $200,000
A credit to Cash for $209,000
A credit to Cash for $212,000
Fortune Tea Co. estimates warranty costs to be 5% of sales. The sales for the period was $450,000. What does the journal
entry to record warranty expense for the period include?
Credit to Estimated Warranty Payable $22,500
Debit to Estimated Warranty Payable $22,500
O Credit to Warranty Expense $22,500
Debit to Cash for $22,500](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0630410c-a19e-44ab-b4d6-77a916c6edca%2F71e3dc44-a27b-45e7-9f42-62afdb0879f6%2Frltm88_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Sarbanes-Oxley Act (SOX) requires which of the following conditions or practices?
The CEO and CFO must also perform an audit of the financial statements.
All auditors must have a minimum of 20 years experience.
Management must take responsibility for establishing and maintaining adequate internal controls.
Auditors must be employees of the company they are auditing.
Which of the following options is true for a classified balance sheet?
Is the same as an unclassified balance sheet
Reports current and noncurrent retained earnings
Orders assets based on liquidity
Classifies common stock into current and long-term
Assume a company has the following information:
Note Payable: $200,000
Interest Rate: 6%
Issue Date: May 1, Year 1
Year-end: December 31, Year 1
Maturity: January 31, Year 2
Which of the following options will the journal entry on the note's maturity date include?
A debit to Interest Expense for $12,000
A credit to Notes Payable for $200,000
A credit to Cash for $209,000
A credit to Cash for $212,000
Fortune Tea Co. estimates warranty costs to be 5% of sales. The sales for the period was $450,000. What does the journal
entry to record warranty expense for the period include?
Credit to Estimated Warranty Payable $22,500
Debit to Estimated Warranty Payable $22,500
O Credit to Warranty Expense $22,500
Debit to Cash for $22,500
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