Off balance sheet financing may involve either: A. An operating lease. B. A Bond

Question

Off balance sheet financing may involve either: A. An operating lease. B. A Bond C. Accounts Payable D. None of the above 2 The FICA tax paid by an employer is: A Cireater than the amount paid by the employee B. Less than the amount paid by the employee C. Equal to the amount paid by the employee D. The employer does not pay FICA tax, only the employee pays the tax. 3. When a company sells bonds at a discounts they will receive which of the following on the issue date0 A An amount less than the face value B An amount more than the stated interest rate times the principal C An amount equal to the stated interest rate times the principal D The company may skip the first interest payment date since the appropriate time has not passed 4. A SI.000 bond that sells for 104 has a selling price of A $1,004 B $1,040 C $1,400 D $1,000 5. If a bond is selling at 103. it is selling at A. Maturity value and yields a 2% interest rate B A discount (Q A premium, D $100 per bond 6 Current liabilities include9 A. Accounts payable B Accrued expenses. C Current portion of long termdebt D All of the above 7. Interest payable on a loan becomcs a liability: A. When the note payable is issued B As it accrues C. At the maturity date D When the borrowed money is received

Explanation / Answer

Ans1 (a) Operating leases are one of the most common forms of off-balance-sheet financing. In these cases, the asset itself is kept on the lessor's balance sheet, and the lessee reports only the required rental expense for use of the asset.

Ans 2© The FICA tax paid by an employer is equal to the amount paid by employee.

Ans 3(a) when a company sells bonds at a discount they will receive an amount less than its face value.

Ans 4(b) A $1000 bond that sells for 104 has a selling price of = ($1000*104)/100=$1040

Ans 5© If the bond is selling at $103, it is selling at premium. When the bond sells for more than Face value or Par it is called premium bonds.

Ans 6(d) Current liabilities includes Accounts payable, accrued expenses, Current portion of long term debt.

Ans 7 (b) Interest payable on a loan becomes a liability, as its accrues.

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