Question 38

1.67pts

When bond interest payments are made semiannually, both the stated and effective interest rates are affected.

Group of answer choices

True

False

Question 37

1.67pts

Which of the following is true of interest expense?

Group of answer choices

It increases the tax liability of a company.

It is a permanent expense of a company.

It helps in creating financial leverage for a company.

It is calculated based on the net income of a company.

Question 36

1.67pts

Off-balance sheet financing means that a company has larger obligations than it shows on its balance sheet.

Group of answer choices

True

False

Question 35

1.67pts

A convertible debt refers to equity interest that can be converted to debt.

Group of answer choices

True

False

Question 34

1.67pts

If the likelihood of a loss is reasonably possible rather than probable, it should be disclosed in the notes to the financial statements.

Group of answer choices

True

False

Question 33

A zero-coupon bond which sells for "95" means that the bond's price is 95% of its face value.

Group of answer choices

True

False

Question 32

1.67pts

Which of the following terms refers to a right which allows the creditor to repossess the property or force its liquidation if the debtor fails to make payments in a timely manner?

Group of answer choices

Convertible

Security

Swap

Interest rate

Question 31

1.67pts

Horace Company sells toaster ovens with an extended warranty which kicks in after the embedded warranty expires after 2 years. During 20X5, Horace sold 6,000 toaster ovens, out of which extended warranty was purchased for 2,000 for $5 each. Based on the past, Horace believes that 100 toaster ovens will have to be repaired at an average cost of $10 each. In 20X5, Horace's accountant correctly recorded warranty expense for the embedded warranty. The accountant also debited cash and credited revenue for $10,000 for the extended warranty sales. Which of the following is true?

Group of answer choices

Revenue is understated

Liabilities are understated

Assets are overstated

Retained earnings are understated

Question 30

1.67pts

Actuaries are business professionals who compute the likelihood of future events.

Group of answer choices

True

False

Question 29

1.67pts

If a company makes an estimate of a contingent loss that is fraudulent, the financial statements in which the estimation was reported should be restated.

Group of answer choices

True

False

Question 28

1.67pts

In the year 20X4, Saturn Corporation buys equipment for $600,000. Later in the same year the equipment is sold for $800,000. However, the money will not be collected from the buyer until 20X7. Saturn's effective tax rate is 30 percent. Which of the following statements is true?

Group of answer choices

$200,000 will be recognized as income tax payable in the year 20X4.

$800,000 sales will be recognized in the year 20X7.

$60,000 income tax expense will be recorded in the year 20X7.

$60,000 will be recognized as deferred income tax liability in the year 20X4.

Question 27

1.67pts

On December 31, 20X5, Edward Inc. leases equipment from Big House Company for six years requiring an annual payment of $30,000 on December 31 of each year. The first payment was made immediately. Edward's incremental borrowing rate is 6 percent and uses straight-line method of depreciation. Which of the following statement is true?

Group of answer choices

Amortization expense will be same irrespective of the lease being recorded as operating or capital.

If the lease is recorded as a finance lease, Edward will initially report the leased asset at an amount equal to the present value of all the lease payments.

Edward will not report any amount related to the lease as it is considered off-balance sheet.

The lease agreement will need to meet all five criteria to be reported as a finance lease.