Question :
41. White Rabbit Company, a distiller of liquors, ages its whiskeys : 1230340
41. White Rabbit Company, a distiller of liquors, ages its whiskeys for approximately 10 years. The firm must pay the costs to produce the whiskey and to store it during the aging process. Using the whiskey as collateral, White Rabbit could borrow to finance the costs incurred during the aging process; doing so would, however, lead to White Rabbit reporting increased liabilities. Instead, White Rabbit sells the whiskey to a bank and agrees to oversee the aging process on the bank’s behalf. At the completion of the aging, White Rabbit Company guarantees an ultimate selling price that pays the lender both the original purchase price and a reasonable return over that amount. White Rabbit
A. bears the economic risks and must show a liability on its balance sheet.
B. bears the economic risks and but does not show a liability on its balance sheet.
C. does not bear the economic risks and must show a liability on its balance sheet.
D. does not bear the economic risks and does not show a liability on its balance sheet..
E. will likely record the transaction as a sale and not a loan.
42. A complicated financing arrangement, whereby firms sell batches of receivables to a legally separate entity whose sole purpose is to hold the receivables and issue claims on their cash flows. The process is referred to as _____ of the receivables.
A. consolidation
B. transformation
C. hypothecation
D. securitization
E. credit enhancement
43. In more complicated financing arrangements, firms sell batches of receivables to a legally separate entity whose sole purpose is to hold the receivables and issue claims on their cash flows. The entity holding the receivables issues securities to investors in return for cash and transfers the cash to the transferor in payment for the receivables. The investors in securities issued by the entity receive payments out of the cash flow from the transferred receivables. Common terminology refers to such an entity as a
A. special purpose entity.
B. pass-through entity.
C. tax shelter.
D. subsidiary entity.
E. securitized entity.
44. Merlin Corporation sets up a pension plan that is legally separate from Merlin. The pension plan specifies the eligibility of employees, the types of promises to employees, the method of funding, and the pension plan administrator. Merlin Corporation specifies the benefit that employees will receive during retirement. Employer contributions plus earnings from investments made with those contributions pay the specified benefit. Common terminology refers to such plans as ____________. The assets in the plan will usually not equal the liabilities of the plan, resulting in an overfunded or underfunded plan.
A. defined benefit pension plans.
B. defined contribution pension plans.
C. accumulated benefit pension plans.
D. accumulated contribution pension plans.
E. unqualified pension plans.
45. Pension plans are usually organized as a
A. trust.
B. corporation.
C. partnership.
D. limited liability company.
E. chartered company.
46. Which of the following is/are true concerning pension plans?
A. The plan administrator serves in a fiduciary capacity for the benefit of employees.
B. The employer cannot access assets in the pension plan except under specific conditions that vary, as a matter of pension law, by jurisdiction.
C. The employer does not consolidate the assets and liabilities of the pension plan with its own assets and liabilities.
D. The total amount of cash that the employer contributes to the pension plan over time is the total amount of pension expense that the employer must recognize in measuring net income.
E. all of the above
47. Which of the following is/are not true concerning pension plans?
A. The plan administrator serves in a fiduciary capacity for the benefit of employees.
B. The employer cannot access assets in the pension plan except under specific conditions that vary, as a matter of pension law, by jurisdiction.
C. The employer does not consolidate the assets and liabilities of the pension plan with its own assets and liabilities.
D. The total amount of cash that the employer contributes to the pension plan over time is never the total amount of pension expense that the employer must recognize in measuring net income.
E. none of the above
48. The actual earnings from pension plan investments include
A. interest, only.
B. interest and dividends, only.
C. interest, dividends, and realized changes in the fair value of plan investments, only.
D. interest, dividends, realized and unrealized changes in the fair value of plan investments.
E. interest, dividends, and unrealized changes in the fair value of plan investments, only.
49. The computation of the pension liability for a defined benefit plan uses actuarial estimates or actuarial assumptions of
A. estimated interest rates,.
B. estimated employee mortality, only.
C. estimated employee turnover, only.
D. estimated employee turnover, mortality, and interest rates,.
E. actual employee turnover, mortality, and interest rates,.
50. The computation of the pension liability for a defined benefit plan uses actuarial estimates or actuarial assumptions of
A. actual interest rates,.
B. estimated employee mortality, only.
C. actual employee turnover, only.
D. estimated employee turnover, mortality, and interest rates,.
E. actual employee turnover, mortality, and interest rates,.
