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