Question Details

The ability to consummate the refinancing 



1.	Which of the following does not demonstrate evidence regarding the ability to consummate a refinancing of short-term debt?
a.	Management indicated that they are going to refinance the obligation.
b.	Actually refinance the obligation.
c.	Have capacity under existing financing agreements that can be used to refinance the obligation.
d.	Enter into a financing agreement that clearly permits the entity to refinance the obligation.
	2.	A company has not declared a dividend on its cumulative preferred stock for the past three years. What is the required accounting treatment or disclosure in this situation?
a.	Record a liability for cumulative amount of preferred stock dividends not declared.
b.	Disclose the amount of the dividends in arrears.
c.	Record a liability for the current year's dividends only.
d.	No disclosure or recognition is required.

	3.	Which of the following situations may give rise to unearned revenue?
a.	Providing trade credit to customers.
b.	Selling inventory.
c.	Selling magazine subscriptions.
d.	Providing manufacturer warranties.
	4.	Which of the following statements is correct?
a.	A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis.
b.	A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to consummate a refinancing.
c.	A company may exclude a short-term obligation from current liabilities if it is paid off after the balance sheet date and subsequently replaced by long-term debt before the balance sheet is issued.
d.	None of these answers are correct.

	5.	The ability to consummate the refinancing of a short-term obligation may be demon- strated by
a.	actually refinancing the obligation by issuing a long-term obligation after the date of the balance sheet but before it is issued.
b.	entering into a financing agreement that permits the enterprise to refinance the debt on a long-term basis.
c.	actually refinancing the obligation by issuing equity securities after the date of the balance sheet but before it is issued.
d.	all of these answers are correct.




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