151.
Commitments, such as contracts for future transactions:
152.
Which of the following is an example of a contingent liability?
153.
Ultimate Company is a defendant in a lawsuit alleging damages of $3 billion. The litigation
is expected to continue for several years, and no reasonable estimate can be made at this
time of Ultimate Company‘s ultimate financial responsibility. This situation is an example
of:
154.
The Music House issues a contract to a new recording artist to produce a number of
albums over the next five years at $1 million per album. This situation is an example of:
155.
The interest coverage ratio:
156.
The interest coverage ratio is computed by dividing:
157.
Which of the following statistics is of more significance to a long-term creditor than to a
short-term creditor?
158.
The basic measure of the amount of leverage being applied within the capital structure of
an organization is the:
159.
Which of the following ratios and rates that measure debt-paying ability focuses on the
long-term position of a company?
The current balance sheet of Apex reports total assets of $20 million, total liabilities of $2
million, and owners’ equity of $18 million. Apex is considering several financing
possibilities in order to expand operations. Each question based on this data is
independent of any others.
160.
Refer to the information above. What will be the effect on Apex’s debt ratio if Apex’s owner
invests an additional $2 million to finance its expansion?
161.
Refer to the information above. Assume Apex borrows $2 million to finance its expansion.
Apex’s debt ratio immediately after the borrowing will be:
162.
Refer to the information above. What is the approximate maximum amount Apex can
borrow and not exceed a debt ratio of .3?
163.
At the end of 2015 it is discovered that the accountant for Gower Company failed to record
$60,000 of interest payable which had accrued since the last interest payment date. The
current ratio, quick ratio, and debt ratio, as well as the financial statements, had already
been computed using the erroneous data. Correction of the accounting records will have
which of the following effects?
The current balance sheet of Gamma reports total assets of $30 million, total liabilities of
$3 million, and owners’ equity of $27 million. Gamma is considering several financing
possibilities in order to expand operations. Each question based on this data is
independent of any others.
164.
Refer to the information above. What will be the effect on Gamma’s debt ratio if Gamma’s
owner invests an additional $5 million to finance its expansion?
165.
Refer to the information above. Assume Gamma borrows $5 million to finance its
expansion. Gamma’s debt ratio immediately after the borrowing will be (rounded):
166.
Refer to the information above. What is the maximum amount Gamma can borrow and not
exceed a debt ratio of .2?
167.
Off balance sheet financing may involve:
168.
The pension expense of the current period is equal to:
169.
An operating lease:
170.
Which one of the following would cause a lease to be accounted for as a capital lease?
171.
A capital lease is recorded in the accounting records of the lessee by an entry:
172.
A company with a fully funded pension plan:
173.
In estimating annual pension expense, which of the following factors would
not
be taken
into consideration?
174.
Pension expense is:
175.
Which of the following is
not
true about post-retirement benefits?
176.
A liability for deferred income taxes represents:
177.
Using different accounting methods on financial statements and tax returns will create:
178.
Deferred taxes are classified as:
Essay Questions
179.
Notes payable
On September 1, 2015, Charles Associates borrowed $600,000 from Diana Credit Union
and signed a 9%, one-year note payable, all due at maturity.
180.
Notes payable
On September 1, 2015, George Hanby borrowed $100,000 from The Actors Credit Union
and signed a 6%, one-year note payable, all due at maturity. The interest on this loan is
stated separately.
10–100
181.
Effects of transactions upon financial measurements
Five events relating to liabilities are described below:
(a) Recorded a bi-weekly payroll, including the issuance of paychecks to employees.
Amounts withheld from employees’ pay and payroll taxes will be forwarded to appropriate
agencies in the near future. (Ignore post-retirement costs.)
(b) Made a monthly payment on a 12-month installment note payable, including interest
and a partial repayment of the principal amount.
(c) Shortly before the maturity date of a six-month bank loan, made arrangements with the
bank to refinance the loan on a long-term basis.
(d) Made an adjusting entry to record accrued interest payable on a 2-year bank loan
(interest is paid quarterly.)
(e) Made a year-end adjusting entry to amortize a portion of the discount on long-term
bonds payable.
Indicate the immediate effects of each transaction or adjusting entry upon the financial
measurements in the five column headings listed below. Use the code letters, I for
increase, D for decrease, and NE for no effect.