Multiple Choice Answers

A working capital loan will generally:
not have an interest rate.
require that interest (if any) be paid monthly.
not affect working capital.
be classified as a longterm liability.

When a company issues a bond at a discount:
the company will pay less than the face amount of the bond at its maturity.
the company will pay more than the face amount of the bond at its maturity.
the company’s interest expense will be less than the interest paid each year.
the company’s interest expense will be more than the interest paid each year.

The longterm liability for deferred income taxes arises because:
some book income will never be subject to income tax
some expenses are deducted for tax purposes before they are deducted for book purposes.
income tax rates change from year to year.
the company has not paid income taxes currently due.

A magazine publisher has an account called “unearned subscription revenue”. The transaction that causes the balance of this account to decrease is:
cash is received from new subscribers
magazines are printed for the publisher.
magazines are mailed to subscribers
subscriptions are sold to new subscribers

Southern Company’s accountant failed to accrue as of 12/31/10 some employee fringe benefit program expenses that were incurred in 2010 and that will be paid in 2011. The result of this omission is to:
overstate the current ration at 12/31/10 and overstate ROI and ROE for the year ended 12/31/10
overstate the current ratio at 12/31/10 and understate ROI and ROE for the year ended 12/31/10
understate the current ratio at 12/31/10 and understate ROI and ORE for the year ended 12/31/10
not affect the current ratio at 12/31/10 but to overstate ROI and ORE for the year ended 12/31/10