Question :
161.Refer to the information above. Assume Apex borrows $2 million : 1237434
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:
A..10.
B..20.
C..33 (rounded).
D..18 (rounded).
$4/$22 = .18
162.Refer to the information above. What is the approximate maximum amount Apex can borrow and not exceed a debt ratio of .3?
A.$4,000,000.
B.$5,500,000.
C.$5,000,000.
D.$600,000.
$7.5/$25.5 = 0.294$7.5 – $2 = $5.5
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?
A.Net income as formerly computed will not be affected by the correction of the error.
B.The interest coverage ratio as formerly computed will not change as a result of the correction.
C.The debt ratio as formerly computed will decrease as a result of the correction.
D.The quick ratio as formerly computed will decrease as a result of the correction.
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?
A.The debt ratio will decrease from .1 (3/30) to .0857 (3/35) after the additional investment.
B.The debt ratio will decrease from 3/27 before to 3/32 after the additional investment.
C.The debt ratio will increase from 30 before to 35 after the additional investment.
D.Additional investment by owner will have no effect on the debt ratio.
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):
A..11.
B..23 (rounded).
C..30 (rounded).
D..35.
$8/$35 = .23(rounded)
166.Refer to the information above. What is the maximum amount Gamma can borrow and not exceed a debt ratio of .2?
A.$3,750,000.
B.$600,000.
C.$6,000,000.
D.$5,750,000.
.2 = ($3 + X)/($30 + X); X = 3.75
167.Off balance sheet financing may involve:
A.An operating lease.
B.A pension plan.
C.Deferred income taxes.
D.A capital lease.
168.The pension expense of the current period is equal to:
A.Amounts paid to retired workers during the current period.
B.The estimated future pension benefits earned by today’s workers during the current period.
C.The present value of the estimated future pension benefits earned by today’s workers during the current period.
D.Cash payments made during the period to the trustee of the pension plan.
169.An operating lease:
A.Creates an asset and a liability on the balance sheet.
B.Is a form of off-balance sheet financing.
C.Is always preferable to a capital lease.
D.Transfers title to the asset being leased.
170.Which one of the following would cause a lease to be accounted for as a capital lease?
A.The lease payments are greater than $10,000 per month.
B.The leased property is located on premises owned by the lessee.
C.The lease term is more than 75% of economic life of the property.
D.The value of the leased property is greater than 10% of the net assets of the lessee.
