FIN575 - Quiz - 2 - SOLUTION

1. (TCO E) Which of the following statements about stock dividends is true? (Points : 3)

        Stock dividends increase the number of shares outstanding.

        Stock dividends are more valuable than stock splits.

        Stock dividends are recorded as a reduction in cash.

        Stock dividends are dividends given in the form of stock from another company.

Question 2.2. (TCO E) Treasury stock is: (Points : 3)

        investments in government securities.

        retained earnings that have been appropriated to make equity investments.

        a company's own stock that it has repurchased.

        assets held for safekeeping in company's vaults.

Question 3.3. (TCO E) Which of the following would not be found listed as a liability on a company's balance sheet? (Points : 3)

        Operating lease obligations

        Capital lease obligations

        Bonds payable

        Taxes payable

Question 4.4. (TCO E) Which of the following is not a component of pension expense? (Points : 3)

        Service cost

        Interest cost

        Actual return on plan assets

        Expected return on plan assets

Question 5.5. (TCO E) Deferral of unrealized gains or losses may generate major difference between the economic pension cost and the: (Points : 3)

        reported pension.

        company pension.

        past pension.

        post retirement pension.

Question 6.6. (TCO E)  Minority interest appears on the balance sheet of some companies. Minority interest: (Points : 3)

        is classified as a liability.

        is classified as equity.

        arises when a company records investments using the equity method.

        arises when a company owns controlling interest in another company, but less than 100%.

Question 7.7. (TCO E) Which of the following would be found listed as a liability on a company's balance sheet? (Points : 3)

        Operating lease obligations

        Projected benefit obligation

        Purchase commitment obligation

        Post-retirement benefits other than pension obligation

Question 8.8. (TCO E) Investing in equity is considered to involve more risk than investing in: (Points : 3)

        stocks.

        bonds.

        cash.

        gold.

Question 9.9. (TCO E) A lessee must account for a lease as a capital lease if: (Points : 3)

        the lease is shorter than 20 years.

        the present value of leases is greater than 10% of lessee's assets.

        the lease is longer than 20 years.

        None of the above

Question 10.10. (TCO E) If a company that leases equipment from another company records these leases as operating leases rather than capital leases, its:(Points : 3)

        recorded liabilities will be lower.

        recorded assets will be higher.

        total cash flows will be higher.

        leverage ratios will be higher.