QuestionSaint Leo Module 4 quiz multiple choice
In accounting for a contingent liability, if the likelihood of the obligation is probable and the amount can be estimated, a company must: (Points : 2)
report the liability on the balance sheet.
provide disclosure in the footnotes to the financial statements.
not recognize the liability until it is certain and the exact amount is known.
do nothing.
In accounting for a contingent liability, if the likelihood of the obligation is probable but the amount can not be estimated, a company must: (Points : 2)
recognize the liability and report it on the balance sheet.
provide disclosure in the footnotes to the financial statements.
not recognize or disclose the liability until it is certain and the exact amount is known.
do nothing.
Quayle Company has been sued by a customer who claims injury from use of Quayle’s product. The company’s lawyers and a consultant believe the likelihood of a judgment against Quayle is remote. What should Quayle do to account for this potential liability? (Points : 2)
Recognize the liability and report it on the balance sheet.
Provide disclosure in the footnotes to the financial statements.
Report an allowance account on the balance sheet.
Do nothing.
Flynn Corp., which is authorized to issue 25,000 shares of no-par common stock, issued 10,000 shares for $150,000. What effect will this event have on the accounting equation? (Points : 2)
Increase assets by $375,000 increase, equity by $375,000
Increase assets by $150,000, increase net income by $150,000
Increase assets by $150,000, increase equity by $150,000
Both B and C
Which of the following statements about the Treasury Stock account is correct? (Points : 2)
Treasury Stock is a liability.
The balance in the Treasury Stock account reduces total Stockholders’ Equity.
Treasury St
ock is an asset.
The balance in Treasury Stock reduces Retained Earnings.
Which of the following would not be a reason for the market price of Bishop Corporation stock to decrease? (Points : 2)
Bishop’s net income for the current year was lower than last year.
The general condition and future outlook of the economy are shaky.
There has been a recent decrease in key interest rates.
Investors expect Bishop’s financial performance to decline in the future.
The price-earnings ratio is the: (Points : 2)
total average stockholder’s equity divided by the number of shares.
interest rate on borrowed money divided by the current prime rate.
price of a company’s products as compared to its net income.
market price of a share of stock divided by the earnings per share.
Purchase of treasury stock for cash is what kind of transaction? (Points : 2)
Asset source
Asset use
Asset exchange
Claims exchange
What effect will the declaration and distribution of a stock dividend have on net income and cash flows? (Points : 2)
No effect on net income or cash flows
No effect on net income, decrease cash flows
Decrease net income, decrease cash flows
Increase net income, no effect on cash flows
Regardless of the specific type of long-term debt, which of the following are normally required with debt transactions? (Points : 2)
To repay the debt
To pay dividends
To pay interest
Both A and C
Current liabilities include: (Points : 2)
some notes payable.
taxes payable.
the current portion of some long-term liabilities.
all of the above.
Payment of previously-accrued interest on a note payable is a(n): (Points : 2)
asset source transaction.
asset use transaction.
asset exchange transaction.
claims exchange transaction.