Finance 470- MC Exam Questions With
100% Correct Answers
The net deferrals are included in the balance sheet as part of:
A. assets.
B. current liabilities.
C. shareholders' equity.
D. long-term liabilities - answer✔B
Pension intensity can be measured by expressing the pension plan assets and the pension
obligation separately as:
A. a percentage of company's total liabilities.
B. a percentage of company's total assets.
C. a percentage of company's net income.
D. a percentage of company's shareholders' equity. - answer✔B
Which of the following is not an actuarial assumption underlying the computation of the pension
obligation?
A. Employee turnover
B. Life expectancy
C. Interest rate
D. Service cost - answer✔D
The plan is said to be underfunded, if:
A. the pension obligation is more than the asset value.
B. the pension obligation is less than the asset value.
C. the pension obligation is equal to the asset value.
D. none of the above. - answer✔A
Synthetic leases may achieve all of the following benefits to the borrower except:
A. window dress the balance sheet.
B. increase cash flow.
C. reduce tax expense on the income statement.
D. increase net income. - answer✔C
If Harms had decreased its compensation growth rate to 4.5% in 2006, the effect would have
been:
A. an increased ABO.
B. an increased PBO.
C. a decreased ABO.
D. a decreased PBO. - answer✔D.
If a company increases its expected return on plan assets this year, the effect would be to:
I. increase plan assets.
II. decrease PBO.
III. decrease pension expense.
IV. decrease minimum liability.
A. I, II and IV
B. I and IV
C. III and IV
D. III only - answer✔D
Which of the following is not a component of pension expense?
A. Service cost
B. Interest cost
C. Actual return on plan assets
D. Expected return on plan assets - answer✔C
Which of the following is reported in the equity section of the balance sheet?
A. Redeemable Preferred stock
B. Treasury stock
C. Investment in affiliates
D. Debentures - answer✔B
Which of the following is not a component of recognized OPEB cost?
A. Service cost
B. Amortization of prior service costs
C. Interest cost
D. Amortization of prior interest costs - answer✔D
On January 1, a company entered into a capital lease resulting in an obligation of $20,000 being
recorded on the balance sheet. The lessor's implicit interest was 10 percent. At the end of the first
year of the lease, the cash flow from financing activities section of the lessee's statement of cash
flows showed a use of cash of $2,200 applicable to the lease. How much did the company pay
the lessor in the first year of the lease?
A. $2,000
B. $2,200
C. $4,200
D. $20,000 - answer✔C
Which of the following lease provisions would cause a lease to be classified as an operating
lease?
A. The lease contains a bargain purchase option.
B. The collectibility of lease payments by the lessor is unpredictable.
C. The term of the lease is more than 75 percent of the estimated economic life of the leased
property.
D. The present value of the minimum lease payments equals or exceeds 90 percent of the fair
value of the leased property. - answer✔B
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