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Multiple choice

1. Debt guarantees are:
never disclosed in the financial statements.
considered to be a contingent liability.
a bad business practice.
recorded as a liability even though it is highly unlikely that the original debtor will default.

2. When a bond sells at a premium, the:
contract rate is above the market rate.
contract rate is equal to the market rate.
contract rate is below the market rate.
bond pays no interest.

3. Obligations due to be paid within one year or the company's operating cycle, whichever is longer, are:
current assets.
current liabilities.
earned revenues.
operating cycle liabilities.

4. A bank that is authorized to accept amounts payable to the federal government is a:
Credit union.
FDIC insured bank.
Federal depository bank.
Federal Reserve Bank.

5. Amounts received in advance from customers for future products or services:
are revenues.
increase income.
are liabilities.
are not allowed under GAAP.

Solution Preview

1. considered to be a contingent liability.
These are contingent on the fact that the debt may not be honored

2. contract rate is ...

Solution Summary

The solution explains some multiple choice questions in accounting