Accounting 101 Exam 3 Prep Questions And All Correct Answers.
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Course
Accounting 101
Institution
Accounting 101
current liabilities - Answer liabilities that are due within one year
quick ratio - Answer (cash + AR + ST investments) / current liabilities
What does the quick ratio measure? - Answer a firm's ability to meet its short-term obligations; stricter test than the current ratio because ...
Accounting 101 Exam 3 Prep Questions
And All Correct Answers.
current liabilities - Answer liabilities that are due within one year
quick ratio - Answer (cash + AR + ST investments) / current liabilities
What does the quick ratio measure? - Answer a firm's ability to meet its short-term obligations; stricter
test than the current ratio because the numerator is comprised of only the most liquid assets
accounts payable turnover - Answer COGS / average accounts payable
What does the accounts payable turnover ratio measure? - Answer how quickly management is paying
its accounts payable
average age of accounts payable - Answer 365 / accounts payable turnover
What does the average age of accounts payable ratio measure? - Answer average number of days it
takes a firm to pay its accounts payable
contingent liability - Answer a potential liability that may or may not become an actual liability; the
amount, timing, and/or recipient are uncertain and depend on future events
If the contingent liability is probable and the amount of the loss can be reasonably estimated...? -
Answer record the loss on the income statement and the liability on the balance sheet
If the contingent liability is possible...? - Answer disclose the loss in the footnotes of the financial
statements
If the contingent loss is remote...? - Answer do nothing
, examples of contingent liabilities - Answer warranties, lawsuits
working capital - Answer current assets - current liabilities
bonds - Answer debt certificates issued to the public
stated interest rate - Answer used to compute cash payments
market interest rate - Answer rate that bondholders could obtain by investing in other bonds that are
similar to the issuing firm's bonds; determines the price of the bond and the interest expense
bond issue price - Answer present value of the principal payment + present value of the cash interest
payments
if market rate = coupon rate...? - Answer bond is sold at par
if market rate > coupon rate...? - Answer bond is sold at a discount
if market rate < coupon rate...? - Answer bond is sold at a premium
a premium _________ to the carrying value (book value) of the bond - Answer adds
a discount _________ from the carrying value (book value) of the bond - Answer subtracts
How do you calculate the interest expense of a bond? - Answer carrying/book value of bond x market
rate
zero coupon bonds - Answer -have no stated interest rate and therefore no cash payments
-sold at a discount
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