Final Exam

Question 1

What has immaterial difference between present and maturity value, with short periods on financial statements?

Answer 1

current liabilities

Question 2

Gain contingency occurs when

Answer 2

probable favorable outcome.

Question 3

What is necessary to exclude short-term obligation from current liabilities?

Answer 3

contractual right to defer settlement for at least one year

Question 4

Comparing income statement of one company to its previous periods is likely for _____.

Answer 4

evaluating past performance

Question 5

Liquidation of a companies current liabilities is reasonably expected within the ________.

Answer 5

operating cycle

Question 6

What is ARO?

Answer 6

Asset Retirement Obligation

Question 7

How is a rebate expense recorded?

Answer 7

Expense is cost of anticipated redemptions. Liability is difference between anticipated amount and actual amount.

Question 8

Are gain contingencies recorded?

Answer 8

no

Question 9

Assurance warranty method should be used when warranty is _________.

Answer 9

integral and inseparable part of the sale

Question 10

Losses related to receivable collections and related to warranties are _____.

Answer 10

accrued

Question 11

Current ratio =

Answer 11

current assets / current liabilities, measures liquidity

Question 12

Acid test =

Answer 12

(cash + AR) / current liabilities similar to current ratio, without inventory or prepaid expenses

Question 13

Are after costs usually significant?

Answer 13

Yes

Question 14

In accounting, litigation is litigation and the type is _____.

Answer 14

irrelevant

Question 15

What are after costs?

Answer 15

costs incurred after sale, incident to correction of defects

Question 16

Face value, length of term of bond and par value are needed for _____.

Answer 16

unamortized discount

Question 17

Use the note’s interest rate or the market/similar interest rate to discount to PV?

Answer 17

market/similar risk

Question 18

Reporting requirements for LT Debt

Answer 18

Fair value, sinking fund payments, maturity amounts for next 5 years, and assets securing debt

Question 19

‘Discount on Bonds Payable’ is shown as what on the balance sheet?

Answer 19

deduction from Bonds Payable

Question 20

JE for interest on bonds purchased between interest dates:

Answer 20

Cash

- -     Bonds Payable   - -       Interest Expense

Question 21

How do bond purchasers receive interest between interest dates?

Answer 21

They pay the seller the interest accrued from last date to present, then receive full payment at next period.

Question 22

Debenture Bond

Answer 22

unsecured

Question 23

Junk Bond

Answer 23

unsecured, like debenture, but very risky

Question 24

Term bond

Answer 24

mature on single date

Question 25

Serial bonds

Answer 25

mature in installments

Question 26

Deep Discount bond

Answer 26

dont bear interest, aka zero-interest debenture

Question 27

Income Bond

Answer 27

pays no interest unless company is profitable

Question 28

Bond issued at '103' means

Answer 28

103% of par value

Question 29

Does carrying amount affect reacquisition price?

Answer 29

no

Question 30

effective interest method

Answer 30

carrying value x effective interest rate

Question 31

Refunding

Answer 31

replacement of a bond with a new one

Question 32

If there is no market and no fair value of a debt instrument, how do we determine the PV?

Answer 32

Imputation

Question 33

Is the stated interest rate needed to calculate loss on redemption?

Answer 33

No

Question 34

Unamortized premium is ______ to face value to find net carrying amount.

Answer 34

added

Question 35

Unamortized discount is ______ to face value to find net carrying amount.

Answer 35

subtracted

Question 36

gain/loss is difference between __________.

Answer 36

Carrying amount and reacquisition price

Question 37

Trading on the equity means:

Answer 37

using borrowed money or preferred stock to make gain

Question 38

Issuing dividend ____ common stock and _____ paid-in-capital.

Answer 38

increase, increase

Question 39

Cost method debits treasury stock for _______.

Answer 39

reacquisition price

Question 40

If you are worried about a takeover event, you will _______ treasury stock.

Answer 40

buy back

Question 41

Stockholders equity will grow with ______.

Answer 41

prrofitability

Question 42

Callable preferred stock is a part of _____.

Answer 42

stockholders equity

Question 43

Liquidating dividend

Answer 43

not based on RE; return on stockholder's investment

Question 44

Common stock Div's distributable is what type of acct?

Answer 44

addition to capital stock

Question 45

A stock Div only affects what account?

Answer 45

stockholder's equity

Question 46

What preferences should be disclosed in the balance sheet?

Answer 46

liquidation