Question :
Multiple Choice Questions
211. Which of the following characteristic of liabilities, rather : 1229364
Multiple Choice Questions
211. Which of the following is characteristic of liabilities, rather than of equity? (More than one answer may be correct.)
A. The obligation matures.
B. Interest paid to the provider of the capital is deductible in the determination of taxable income.
C. The capital providers’ claims are residual in the event of liquidation of the business.
D. The capital providers normally have the right to exercise control over business operations.
212. On October 1, Dalton Corp. borrows $100,000 from National Bank, signing a six-month note payable for that amount, plus interest to be computed at a rate of 9% per annum. Indicate all correct answers.
A. Dalton’s liability at October 1 is only $100,000.
B. The maturity value of this note is $104,500.
C. At December 31, Dalton will have a liability for accrued interest payable in the amount of $4,500.
D. Dalton’s total liability for this loan at November 30 is $101,500.
213. Identify all correct statements concerning payrolls and related payroll costs:
A. Both employers and employees pay Social Security and Medicare taxes.
B. Workers’ compensation premiums are withheld from employees’ wages.
C. An employer’s total payroll costs usually exceed total wages expense by about 7 1/2%.
D. Under current law, employers are required to pay Social Security taxes on employees’ earnings, but are not required to pay for health insurance.
214. Identify those types of information that can readily be determined from an amortization table for an installment loan. (More than one answer may be correct.)
A. Interest expense on this liability for the current year.
B. The present value of the future payments under current market conditions.
C. The unpaid balance remaining after each payment.
D. The portion of the unpaid balance that is a current liability.
215. Which of the following statements is (are) correct? (More than one statement may be correct.)
A. A bond issue is a technique for subdividing a very large loan into a great many small, transferable units.
B. Bond interest payments are contractual obligations, whereas the board of directors determines whether or not dividends will be paid.
C. As interest rates rise, the market prices of bonds fall; as interest rates fall, bond prices tend to rise.
D. Bond interest payments are deductible in determining income subject to income taxes, whereas dividends paid to stockholders are not deductible.
216. Identify all statements that are consistent with the concept of present value. (More than one answer may be correct.)
A. The present value of a future amount is always less than that future amount.
B. An amount of money available today is considered more valuable than the same sum which will not become available until a future date.
C. A bond’s issue price is equal to the present value of its future cash flows.
D. The liability for an installment note payable is recorded at only the principal amount, rather than the sum of the scheduled payments.
217. Identify those trends that are unfavorable from the viewpoint of a bondholder (More than one answer may be correct.)
A. Market interest rates are steadily rising.
B. The issuing company’s interest coverage ratio is steadily rising.
C. The issuing company’s net cash flow from operating activities is steadily declining.
D. The issuing company’s debt ratio is steadily declining.
218. A basic difference between loss contingencies and “real” liabilities is:
A. Liabilities stem from past transactions; loss contingencies stem from future events.
B. Liabilities always are recorded in the accounting records, whereas loss contingencies never are.
C. The extent of uncertainty involved.
D. Liabilities can be large in amount, whereas loss contingencies are immaterial.
219. Which of the following situations require recording a liability in 2011? (More than one answer may be correct.)
A. In 2011, a company manufactures and sells stereo equipment which carries a three-year warranty.
B. In 2011, a theater group receives payments in advance from season ticket holders for productions to be performed in 2012.
C. A company is a defendant in a legal action. At the end of 2011, the company’s attorney feels it is possible the company will lose, and that the amount of the loss might be material.
D. During 2011, a midwest agricultural co-operative is concerned about the risk of loss if inclement weather destroys the crops.
220. Silverado maintains a fully funded pension plan. During 2011, $1 million was paid to retired workers, and workers currently employed by the company earned a portion of the right to receive pension payments expected to total $6 million over their lifetimes. Silverado’s pension expense for 2011 amounts to:
A. $1 million.
B. $6 million.
C. $7 million.
D. Some other amount.
221. Deferred income taxes result from:
A. The fact that bond interest is deductible in the computation of taxable income.
B. Depositing income taxes due in future years in a special fund managed by an independent trustee.
C. Timing differences between when income is recognized in financial statements and in income tax returns.
D. The inability of a bankrupt company to pay its income tax liability on schedule.
