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web.groovymark@gmail.com
- December 14, 2024
Question 41
What are Financing Activities?
A) Activities that involve long-term assets
B) Activities that involve liability and equity, such as issuing debt or repurchasing stock
C) Activities that involve selling inventory and collecting receivables
D) Activities that involve obtaining credit from suppliers
Answer: B) Activities that involve liability and equity, such as issuing debt or repurchasing stock
Explanation:
Financing Activities include transactions that affect liabilities and equity, such as issuing bonds, repurchasing stock, or paying dividends.
Question 42
What is the Full Disclosure Principle?
A) The principle that companies should disclose only material information
B) The principle that companies must disclose all relevant financial information to users of the financial statements
C) The principle that requires companies to disclose financial statements annually
D) The principle that companies should disclose information to regulatory bodies only
Answer: B) The principle that companies must disclose all relevant financial information to users of the financial statements
Explanation:
The Full Disclosure Principle mandates that companies provide all information necessary for users of the financial statements to make informed decisions.
Question 43
What is a Guaranteed Residual Value?
A) The amount the lessee must pay if the asset’s residual value is lower than expected
B) The value of the asset guaranteed by the lessor at the end of the lease
C) The amount the lessee expects to receive if they purchase the asset
D) The guaranteed fair value of the asset at the start of the lease term
Answer: A) The amount the lessee must pay if the asset's residual value is lower than expected
Explanation:
A Guaranteed Residual Value is the amount the lessee is obligated to pay at the end of the lease term if the actual residual value is less than the guaranteed amount specified in the lease agreement.
Question 44
What are Held-to-Maturity Securities?
A) Securities that a company holds for trading purposes
B) Securities that the company intends and has the ability to hold until maturity
C) Securities that must be sold within three months
D) Securities held by the government
Answer: B) Securities that the company intends and has the ability to hold until maturity
Explanation:
Held-to-Maturity Securities are debt securities that a company intends to hold until they mature, rather than selling them in the short term.
Question 45
What is Holding Gain or Loss?
A) The difference between the purchase price and sale price of a security
B) The net change in the fair value of a security from one period to another, excluding dividend or interest income
C) The income received from holding a stock for a long period
D) The capital gain or loss from selling an investment
Answer: B) The net change in the fair value of a security from one period to another, excluding dividend or interest income
Explanation:
Holding Gain or Loss refers to the change in the fair value of a security over time, not including income earned through dividends or interest.
Question 46
What is the Implicit Interest Rate in a lease?
A) The interest rate stated in the lease agreement
B) The discount rate that equates the present value of the lease payments with the fair value of the asset
C) The interest rate applied to variable payments in the lease
D) The interest rate charged by the lessor’s lender
Answer: B) The discount rate that equates the present value of the lease payments with the fair value of the asset
Explanation:
The Implicit Interest Rate in a lease is the discount rate that, when applied to the lease payments, results in a present value equal to the fair value of the leased asset.
Question 47
What is the Incremental Borrowing Rate in a lease?
A) The interest rate charged by the lessor
B) The interest rate a lessee would incur to borrow funds over a similar term
C) The interest rate the lessor applies to deferred payments
D) The interest rate the lessee applies to early payments
Answer: B) The interest rate a lessee would incur to borrow funds over a similar term
Explanation:
The Incremental Borrowing Rate is the rate of interest the lessee would pay if they were to borrow the necessary funds to purchase the asset rather than lease it.
Question 48
What is the Indirect Method in a Statement of Cash Flows?
A) A method that starts with cash received and adjusts for non-cash items
B) A method that adjusts net income for items that affect reported income but not cash
C) A method that lists all cash inflows and outflows in chronological order
D) A method that only lists operating activities
Answer: B) A method that adjusts net income for items that affect reported income but not cash
Explanation:
The Indirect Method of preparing a Statement of Cash Flows adjusts net income for non-cash transactions and changes in working capital to derive cash from operating activities.
Question 49
What are Input Measures?
A) Measures of the number of hours worked by employees
B) Measures of the costs incurred and efforts devoted to a project under the percentage-of-completion method
C) Measures of the efficiency of a company’s production processes
D) Measures of the quality of finished goods
Answer: B) Measures of the costs incurred and efforts devoted to a project under the percentage-of-completion method
Explanation:
Input Measures under the percentage-of-completion method assess the costs and efforts incurred during a project to determine the extent of progress made toward completion.
Question 50
What are Investing Activities?
A) Activities that involve liability and equity
B) Activities that involve acquiring and disposing of long-term assets
C) Activities that involve selling products and collecting receivables
D) Activities that involve making short-term investments
Answer: B) Activities that involve acquiring and disposing of long-term assets
Explanation:
Investing Activities include acquiring and disposing of investments and long-term productive assets, such as buying or selling property, equipment, or securities.
