Question
1. Hanford Inc. purchased several investments in debt securities during 2015, its first year of operations. The following information pertains to these securities. The fluctuations
1. Hanford Inc. purchased several investments in debt securities during 2015, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent.
Fair | Fair | Amortized | Amortized | |
Value | Value | Cost | Cost | |
Held to Maturity Securities: | 12/31/2017 | 12/31/2018 | 12/31/2017 | 12/31/2018 |
ABC Co. Bonds | $375,000 | $400,000 | $367,500 | $360,000 |
Fair Value | Fair Value | |||
Trading Securities: | 12/31/2017 | 12/31/2018 | Cost | |
DEF Co. Bonds | $48,000 | $59,500 | $66,000 | |
GEH Inc. Bonds | $47,000 | $77,000 | $39,000 | |
IJK Inc. Bonds | $44,000 | $38,500 | $32,900 | |
Fair Value | Fair Value | |||
Available for Sale Securities: | 12/31/2017 | 12/31/2018 | Cost | |
LMN Co. Bonds | $130,500 | $150,400 | $140,000 | |
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What balance sheet amount would Hanford report for the total of its investments in debt securities at 12/31/2017?
A. $625,800
B. $637,000
C. $644,500
D. $645,400
2. Classifying liabilities as either current or long-term helps creditors assess
A. the relative risk of a firm's liabilities.
B. the amount of a firm's liabilities.
C. profitability.
D. the degree of a firm's liabilities
3. Other things being equal, most managers would prefer to report liabilities as noncurrent rather than current. The logic behind this preference is that the long-term classification permits the company to report
A. lower working capital and a higher current ratio.
B. higher working capital and a higher current ratio.
C. higher working capital and a lower debt-to-equity ratio.
D. higher working capital and a higher inventory turnover.
4. An extended warranty typically results in the seller
A. estimating the contingent liability associated with the warranty at the time the warranty is sold.
B. recognizing revenue over the life of the extended warranty.
C. accruing an expense for anticipated warranty costs at the time the warranty is sold.
D. refunding warranty payments upon expiration of the warranty.
5. Uniqua Shoes issued a $100,000, eight-month, noninterest-bearing note. The loan was made by Second Commercial Bank, whose stated discount rate is 9%. The effective interest rate on this loan (rounded) is
A. 9.6%. B. 9.0%. C. 9.5%. D. 9.7%
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