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Current Assets
Current Assets MCQs
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According to ASC Topic 860, which of the following statements is true regarding servicing assets and servicing liabilities? I. Either the amortizati...
I only.
I and II.
II only.
I and III.
?
Binsar Corporation transfers a financial asset but continues to hold an interest in the servicing asset. How should the interest in the servicing as...
At the present value of future cash flows.
At fair value.
At the difference between the previous carrying amount and the amount derecognized.
At net realizable value.
?
Which of the following is true?
A debtor may not grant a security interest in certain assets to a lender to serve as collateral with recourse.
A debtor may not grant a security interest in certain assets to a lender to serve as collateral without recourse.
The arrangement of having collateral transferred to a secured party is known as a pledge.
Secured parties are never permitted to sell collateral held under a pledge.
?
In accordance with accounting for transfers and servicing, all of the following would be disclosed except
Policy for requiring collateral or other security due to repurchase agreements or securities lending transactions.
Cash flows between the securitization special-purpose entity (SPE) and the transferor.
Accounting policies for measuring interests that continue to be held.
Description of assets or liabilities with estimable fair values.
?
Taft Inc. borrowed $1,000,000 from Wilson Company on July 2, year 8. As part of the loan agreement, Taft granted Wilson a security interest in land ...
$0
$750,000
$900,000
$950,000
?
If a firm is offered credit terms of 2/10, net 30 on its purchases. Sound cash management practices would mean that the firm would pay the account o...
Day 2 and 30.
Day 2 and 10.
Day 10.
Day 30.
?
The following forms of short-term borrowings are available to a firm: • Floating lien • Factoring • Revolving credit • Chattel mortgages ...
Floating lien, revolving credit, chattel mortgage, and commercial paper.
Factoring, chattel mortgage, bankers’ acceptances, and line of credit.
Floating lien, chattel mortgage, bankers’ acceptances, and line of credit.
Revolving credit, bankers’ acceptances, line of credit, and commercial paper.
?
A company obtaining short-term financing with trade credit will pay a higher percentage financing cost, everything else being equal, when
The discount percentage is lower.
The items purchased have a higher price.
The items purchased have a lower price.
The supplier offers a longer discount period.
?
Which of the following is not related to loans involving inventory?
Factoring.
Blanket liens.
Trust receipts.
Warehousing.
?
The London Interbank Offered Rate (LIBOR) represents an example of a
Risk-free rate.
Nominal rate.
Credit risk adjusted rate.
Long-term rate.
?
An advantage of the use of long-term debt as opposed to short-term debt to finance current assets is
It decreases the risk of the firm.
It generally is less costly than short-term debt.
It generally places fewer restrictions on the firm.
It is easy to repay.
?
The chief financial officer of Smith Glass Inc. follows the policy of matching the maturity of assets with the maturity of financing. The implicatio...
The seasonal expansion of cash, receivables, and inventory should be financed by short-term debt such as vendor payables and bank debt.
The minimum level of cash, receivables, and inventory required to stay in business can be considered permanent, and financed with long-term debt or equity.
Cash, receivables, and inventory should be financed with long-term debt or equity.
Long-term assets, like plant and equipment, should be financed with long-term debt or equity.
?
Which form of asset financing involves the public offering of debt collateralized by a firm’s accounts receivables?
Trust receipts.
Warehousing.
Blanket inventory liens.
Securitization of assets.
?
Hagar Company’s bank requires a compensating balance of 20% on a $100,000 loan. If the stated interest on the loan is 7%, what is the effective co...
5.83%
7.00%
8.40%
8.75%
?
Which form of asset financing involves the public offering of debt collateralized by a firm’s accounts receivables?
Trust receipts.
Warehousing.
Blanket inventory liens.
Securitization of assets.
?
CyberAge Outlet, a relatively new store, is a café that offers customers the opportunity to browse the Internet or play computer games at their ta...
27.0%
25.2%
28.0%
30.2%
?
CyberAge Outlet, a relatively new store, is a café that offers customers the opportunity to browse the Internet or play computer games at their ta...
Yes, if the cost of alternative short-term financing is less.
Yes, if the firm’s weighted-average cost of capital is equal to its weighted-average cost of trade credit.
No, if the cost of alternative long-term financing is greater.
Yes, if the cost of alternative short-term financing is greater.
?
A company obtained a short-term bank loan of $250,000 at an annual interest rate of 6%. As a condition of the loan, the company is required to maint...
6.44%
7.11%
5.80%
6.66%
?
With respect to the use of commercial paper by an industrial firm, which one of the following statements is most likely to be true?
The commercial paper is issued through a bank.
The commercial paper has a maturity of 60-270 days.
The commercial paper is secured by the issuer’s assets.
The commercial paper issuer is a small company.
?
A manufacturing firm wants to obtain a short-term loan and has approached several lending institutions. All of the potential lenders are offering th...
Simple interest, no compensating balance.
Discount interest, no compensating balance.
Simple interest, 20% compensating balance required.
Discount interest, 20% compensating balance required.
?
Elan Corporation is considering borrowing $100,000 from a bank for one year at a stated interest rate of 9%. What is the effective interest rate to ...
8.10%
9.00%
9.81%
9.89%
?
The Red Company has a revolving line of credit of $300,000 with a one-year maturity. The terms call for a 6% interest rate and a 1/2% commitment fee...
$6,000
$6,500
$7,000
$7,500
?
Which of the following financial instruments generally provides the largest source of short-term credit for small firms?
Installment loans.
Commercial paper.
Trade credit.
Mortgage bonds.
?
The prime rate is the
Size of the commitment fee on a commercial bank loan.
Effective cost of a commercial bank loan.
Rate charged on business loans to borrowers with high credit ratings.
Rate at which a bank borrows from the Federal Reserve central bank.
?
A compensating balance
Compensates a financial institution for services rendered by providing it with deposits of funds.
Is used to compensate for possible losses on a marketable securities portfolio.
Is a level of inventory held to compensate for variations in usage rate and lead time.
Is an amount paid by financial institutions to compensate large depositors.
?
On January 1, Scott Corporation received a $300,000 line of credit at an interest rate of 12% from Main Street Bank and drew down the entire amount ...
11.00%
12.00%
12.94%
14.12%
?
Trading securities, by definition, are properly classified in the balance sheet as:
Shareholders equity.
Intangibles.
Current assets.
Other assets.
