Question 1

Gain contingencies are usually recognized in the income statement when

Accepted Answer

A) Realized 
B) Occurrence is reasonably possible and the amount can be reasonably estimated 
C) Occurrence is probable and the amount can be reasonably estimated 
D) The amount can be reasonably estimated 
A) Realized 
B) Occurrence is reasonably possible and the amount can be reasonably estimated 
C) Occurrence is probable and the amount can be reasonably estimated 
D) The amount can be reasonably estimated A

Question 2

Trading on the equity leverage)refers to the

Accepted Answer

A) Amount of working capital 
B) Amount of capital provided by owners 
C) Use of borrowed money to increase the return to owners 
D) Number of times interest is earned 
A) Amount of working capital 
B) Amount of capital provided by owners 
C) Use of borrowed money to increase the return to owners 
D) Number of times interest is earned C

Question 3

When the issuer of bonds exercises the call provision to retire the bonds,the excess of the cash paid over the carrying amount of the bonds should be recognized separately as a an)

Accepted Answer

A) Extraordinary loss 
B) Extraordinary gain 
C) Loss from continuing operations 
D) Loss from discontinued operations 
A) Extraordinary loss 
B) Extraordinary gain 
C) Loss from continuing operations 
D) Loss from discontinued operations C

Question 4

Unamortized debt discount should be reported on the balance sheet of the issuer as

Accepted Answer

A) A direct deduction from the face amount of the debt 
B) A direct deduction from the present value of the debt 
C) A deferred charge 
D) Part of the issue costs 
A) A direct deduction from the face amount of the debt 
B) A direct deduction from the present value of the debt 
C) A deferred charge 
D) Part of the issue costs

Question 5

If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount,interest expense in the earlier years will be

Accepted Answer

A) Greater than if the compound interest method were used 
B) The same as if the compound interest method were used 
C) Less than if the compound interest method were used 
D) Less than the amount of the interest payments 
A) Greater than if the compound interest method were used 
B) The same as if the compound interest method were used 
C) Less than if the compound interest method were used 
D) Less than the amount of the interest payments

Question 6

In the situation described in problem 10,if Lee records the asset and note at $11,800,the overall effect will be

Accepted Answer

A) A correct acquisition cost and correct interest expense 
B) A correct acquisition cost and understated interest expense 
C) An understated acquisition cost and understated interest expense 
D) An overstated acquisition cost and understated interest expense 
A) A correct acquisition cost and correct interest expense 
B) A correct acquisition cost and understated interest expense 
C) An understated acquisition cost and understated interest expense 
D) An overstated acquisition cost and understated interest expense

Question 7

Discuss the four basic reasons why a corporation may wish to issue debt rather than equity securities

Accepted Answer

There are four basic reasons why a corpo

Question 8

The physical capital maintenance concept of income would require that a company's bonds payable be

Accepted Answer

A) Reported in the balance sheet at their amortized issue price and that changes in their market values be reported in earnings. 
B) Reported in the balance sheet at their amortized issue price and that changes in their market values not be reported in earnings. 
C) Reported in the balance sheet at their fair market values and that changes in their market values be reported in earnings. 
D) Reported in the balance sheet at their fair market values and that changes in their market values be reported in other comprehensive income. 
A) Reported in the balance sheet at their amortized issue price and that changes in their market values be reported in earnings. 
B) Reported in the balance sheet at their amortized issue price and that changes in their market values not be reported in earnings. 
C) Reported in the balance sheet at their fair market values and that changes in their market values be reported in earnings. 
D) Reported in the balance sheet at their fair market values and that changes in their market values be reported in other comprehensive income.

Question 9

A zero coupon bond is different from a typical bond issue because

Accepted Answer

A) The investor can clip the coupons and get paid for the periodic interest on the bond while a typical bond does not have coupons. 
B) It is reported in the balance sheet net of the discount on the bond. 
C) The zero coupon bond's deep discount is reported as an asset and a typical bond that is issued at a discount is reported net of the discount. 
D) It does not pay any periodic interest while the typical bond does. 
A) The investor can clip the coupons and get paid for the periodic interest on the bond while a typical bond does not have coupons. 
B) It is reported in the balance sheet net of the discount on the bond. 
C) The zero coupon bond's deep discount is reported as an asset and a typical bond that is issued at a discount is reported net of the discount. 
D) It does not pay any periodic interest while the typical bond does.

Question 10

Ace Corporation has a debt to total assets ratio of 65%.This tells the user of Ace's financial statements

Accepted Answer

A) Ace is getting a 35% return on its assets 
B) There is a risk Ace cannot pay its debts as they come due 
C) 65% of the assets are financed by the stockholders 
D) Ace should issue more debt to reduce its risk 
A) Ace is getting a 35% return on its assets 
B) There is a risk Ace cannot pay its debts as they come due 
C) 65% of the assets are financed by the stockholders 
D) Ace should issue more debt to reduce its risk

Question 11

ABC Company has a note payable that is due six months after its year end.Under which of the following conditions will ABC be able to classify the note as a long term debt.

Accepted Answer

A) ABC cannot classify the note as long term because it is due within the current operating cycle or one year,whichever is longer. 
B) ABC can classify the note as long term because it is due next year. 
C) ABC can classify the note as long term because management intends to refinance it with long term debt and has an agreement to do so with a qualified creditor. 
D) ABC can classify the note as long term because it is a 10 year note and management intends to pay the maturity value at the end of the 10 year period. 
A) ABC cannot classify the note as long term because it is due within the current operating cycle or one year,whichever is longer. 
B) ABC can classify the note as long term because it is due next year. 
C) ABC can classify the note as long term because management intends to refinance it with long term debt and has an agreement to do so with a qualified creditor. 
D) ABC can classify the note as long term because it is a 10 year note and management intends to pay the maturity value at the end of the 10 year period.

Question 12

In general,derivative instruments are

Accepted Answer

A) Not reported in a company's balance sheet because their impact on the company is not yet known.. 
B) Reported in the balance sheet at fair value and changes in their fair value are reported in earnings. 
C) Reported in the balance sheet at historical cost and changes in their fair value are reported in earnings. 
D) Reported in the balance sheet at fair value and changes in their fair value are reported in other comprehensive income. 
A) Not reported in a company's balance sheet because their impact on the company is not yet known.. 
B) Reported in the balance sheet at fair value and changes in their fair value are reported in earnings. 
C) Reported in the balance sheet at historical cost and changes in their fair value are reported in earnings. 
D) Reported in the balance sheet at fair value and changes in their fair value are reported in other comprehensive income.

Question 13

An unearned revenue is an example of aan)

Accepted Answer

A) Deferred credit. 
B) Accrued liability. 
C) Customer billing that takes place before a job is finished. 
D) Accounts receivable. 
A) Deferred credit. 
B) Accrued liability. 
C) Customer billing that takes place before a job is finished. 
D) Accounts receivable.

Question 14

List the three methods of accounting for bonds refunding.Under current GAAP,how are bond refundings recorded?

Accepted Answer

In ARB No.43,three methods of accounting

Question 15

How are compound financial instruments accounted for under IAS No.32?

Accepted Answer

IAS No.32 indicates that some financial

Question 16

According to IAS No.39,when are financial liabilities recognized?

Accepted Answer

IAS No.39 requires recognition

Question 17

An example of an item that is not a liability is

Accepted Answer

A) Dividends payable in stock 
B) Advances from customers on contracts 
C) Accrued estimated warranty costs 
D) The portion of long-term debt due within one year 
A) Dividends payable in stock 
B) Advances from customers on contracts 
C) Accrued estimated warranty costs 
D) The portion of long-term debt due within one year

Question 18

How should the value of warrants attached to a debt security be account for?

Accepted Answer

A) No value assigned 
B) A separate portion of paid-in capital 
C) An appropriation of retained earnings 
D) A liability 
A) No value assigned 
B) A separate portion of paid-in capital 
C) An appropriation of retained earnings 
D) A liability

Question 19

"Trading on the equity" financial leverage)is likely to be a good financial strategy for stockholders of companies having

Accepted Answer

A) Cyclical high and low amounts of reported earnings 
B) Steady amounts of reported earnings 
C) Volatile fluctuation in reported earnings over short periods of time 
D) Steadily declining amounts of reported earnings 
A) Cyclical high and low amounts of reported earnings 
B) Steady amounts of reported earnings 
C) Volatile fluctuation in reported earnings over short periods of time 
D) Steadily declining amounts of reported earnings

Question 20

When it is necessary to impute an interest rate in connection with a note payable,the rate should be

Accepted Answer

A) Two-thirds of the prime rate effective at the time the obligation is incurred 
B) The same as that used in the GNP Implicit Price Deflator 
C) At least equal to the rate at which the debtor can obtain financing of a similar nature from other sources at the date of the transaction 
D) As near zero as can be justified 
A) Two-thirds of the prime rate effective at the time the obligation is incurred 
B) The same as that used in the GNP Implicit Price Deflator 
C) At least equal to the rate at which the debtor can obtain financing of a similar nature from other sources at the date of the transaction 
D) As near zero as can be justified

Gain contingencies are usually recognized in the income statement when

Trading on the equity leverage)refers to the

When the issuer of bonds exercises the call provision to retire the bonds,the excess of the cash paid over the carrying amount of the bonds should be recognized separately as a an)

Unamortized debt discount should be reported on the balance sheet of the issuer as

If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount,interest expense in the earlier years will be

In the situation described in problem 10,if Lee records the asset and note at $11,800,the overall effect will be

Discuss the four basic reasons why a corporation may wish to issue debt rather than equity securities

The physical capital maintenance concept of income would require that a company's bonds payable be

A zero coupon bond is different from a typical bond issue because

Ace Corporation has a debt to total assets ratio of 65%.This tells the user of Ace's financial statements

ABC Company has a note payable that is due six months after its year end.Under which of the following conditions will ABC be able to classify the note as a long term debt.

In general,derivative instruments are

An unearned revenue is an example of aan)

List the three methods of accounting for bonds refunding.Under current GAAP,how are bond refundings recorded?

How are compound financial instruments accounted for under IAS No.32?

According to IAS No.39,when are financial liabilities recognized?

An example of an item that is not a liability is

How should the value of warrants attached to a debt security be account for?

"Trading on the equity" financial leverage)is likely to be a good financial strategy for stockholders of companies having

When it is necessary to impute an interest rate in connection with a note payable,the rate should be

The Development of Accounting Theory

The Pursuit of the Conceptual Framework

International Accounting

Research Methodology and Theories on the Uses of Accounting Information

Income Concepts

Financial Statement I: the Income Statement

Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

Working Capital

Long-Term Assets I: Property, Plant, and Equipment

Long-Term Assets Ii: Investments and Intangibles

Accounting for Income Taxes

Leases

Pensions and Other Postretirement Benefits

Equity

Accounting for Multiple Entities

Financial Reporting Disclosure Requirement and Ethical Responsibilities

Filters

Exam 11: Long-Term Liabilities

Gain contingencies are usually recognized in the income statement when

Trading on the equity leverage)refers to the

When the issuer of bonds exercises the call provision to retire the bonds,the excess of the cash paid over the carrying amount of the bonds should be recognized separately as a an)

Unamortized debt discount should be reported on the balance sheet of the issuer as

If bonds are issued initially at a discount and the straight-line method of amortization is used for the discount,interest expense in the earlier years will be

In the situation described in problem 10,if Lee records the asset and note at $11,800,the overall effect will be

Discuss the four basic reasons why a corporation may wish to issue debt rather than equity securities

The physical capital maintenance concept of income would require that a company's bonds payable be

A zero coupon bond is different from a typical bond issue because

Ace Corporation has a debt to total assets ratio of 65%.This tells the user of Ace's financial statements

ABC Company has a note payable that is due six months after its year end.Under which of the following conditions will ABC be able to classify the note as a long term debt.

In general,derivative instruments are

An unearned revenue is an example of aan)

List the three methods of accounting for bonds refunding.Under current GAAP,how are bond refundings recorded?

How are compound financial instruments accounted for under IAS No.32?

According to IAS No.39,when are financial liabilities recognized?

An example of an item that is not a liability is

How should the value of warrants attached to a debt security be account for?

"Trading on the equity" financial leverage)is likely to be a good financial strategy for stockholders of companies having

When it is necessary to impute an interest rate in connection with a note payable,the rate should be

The Development of Accounting Theory

The Pursuit of the Conceptual Framework

International Accounting

Research Methodology and Theories on the Uses of Accounting Information

Income Concepts

Financial Statement I: the Income Statement

Financial Statements Ii: the Balance Sheet and the Statement of Cash Flows

Working Capital

Long-Term Assets I: Property, Plant, and Equipment

Long-Term Assets Ii: Investments and Intangibles

Accounting for Income Taxes

Leases

Pensions and Other Postretirement Benefits

Equity

Accounting for Multiple Entities

Financial Reporting Disclosure Requirement and Ethical Responsibilities

Filters