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web.groovymark@gmail.com
- December 12, 2024
Question 41
Any excess of the net carrying amount over the reacquisition price is a __________ from extinguishment.
A. Loss
B. Gain
C. Discount
D. Premium
Answer: B. Gain
Explanation: When the reacquisition price of a bond is less than its net carrying amount, the difference is recognized as a gain from extinguishment of debt.
Question 42
The excess of the reacquisition price over the net carrying amount is a __________ from extinguishment.
A. Gain
B. Loss
C. Premium
D. Discount
Answer: B. Loss
Explanation: If the reacquisition price is higher than the net carrying amount, the difference is recorded as a loss from extinguishment of debt.
Question 43
Total Liabilities / Total Assets is the formula for which ratio?
A. Debt to equity ratio
B. Current ratio
C. Debt to assets ratio
D. Quick ratio
Answer: C. Debt to assets ratio
Explanation: The debt to assets ratio measures the proportion of a company’s assets that are financed by debt and is calculated by dividing total liabilities by total assets.
Question 44
Net Sales / Average Total Assets is the formula for which ratio?
A. Return on equity
B. Asset turnover
C. Return on assets
D. Profit margin
Answer: B. Asset turnover
Explanation: Asset turnover measures how efficiently a company is using its assets to generate revenue by dividing net sales by average total assets.
Question 45
Net Income / Net Sales is the formula for which ratio?
A. Profit margin on sales
B. Asset turnover
C. Return on assets
D. Debt to equity ratio
Answer: A. Profit margin on sales
Explanation: Profit margin on sales indicates how much of each dollar of sales results in profit, and is calculated by dividing net income by net sales.
Question 46
Net Income / Average Total Assets is the formula for which ratio?
A. Return on equity
B. Profit margin
C. Return on assets
D. Debt to assets ratio
Answer: C. Return on assets
Explanation: Return on assets (ROA) measures how effectively a company is using its assets to generate profit by dividing net income by average total assets.
Question 47
Which of the following is NOT a current liability?
A. Accounts payable
B. Long-term debt
C. Unearned revenues
D. Sales tax payable
Answer: B. Long-term debt
Explanation: Long-term debt is a non-current liability because it is not due within the next fiscal year, unlike the other options, which are current liabilities.
Question 48
Which of the following represents a contingent liability that is NOT typically accrued?
A. Obligation related to product warranties
B. Pending litigation
C. Guarantees of indebtedness of others
D. Risk of loss from catastrophes assumed by insurance companies
Answer: D. Risk of loss from catastrophes assumed by insurance companies
Explanation: Contingencies such as the risk of loss from catastrophes are not accrued unless the loss is probable and can be reasonably estimated.
Question 49
Which of the following is a function of use or productivity rather than the passage of time?
A. Straight-line method
B. Activity method
C. Declining balance method
D. Sum-of-the-years’-digits method
Answer: B. Activity method
Explanation: The activity method, also known as the units-of-production method, allocates depreciation based on the actual usage or productivity of an asset rather than the passage of time.
Question 50
Under which condition should the restoration of an impairment loss be recognized?
A. For all tangible assets, whether held for use or disposal
B. For assets held for disposal
C. For assets held for use
D. For assets that have already been disposed of
Answer: B. For assets held for disposal
Explanation: Restoration of impairment losses is permitted only for assets held for disposal, not for those held for use or already disposed of.
