Long-term debt position of two firms

Reference no: EM13754674

Question 1. Jones Company has long-term debt of $1,000,000, whereas Smith Company, Jones' competitor, has long-term debt of $200,000. Which of the following statements best represents an analysis of the long-term debt position of these two firms?

Smith Company's times interest earned should be lower than Jones'.
Jones obviously has too much debt when compared to its competitor.
Jones should sell more stock and use less debt.
There is not enough information to determine if any of the answers is correct.

Question 2. If a parent has some control over a subsidiary but the subsidiary is not consolidated, the subsidiary is accounted for as

an investment.
a liability.
a fixed asset.
None of the above

Question 3. Which of the following is not true relating to treasury stock?

Treasury stock may be recorded at par or stated value.
Treasury stock may be recorded at the cost of the stock.
Treasury stock is, in essence, an increase in paid-in-capital.
Treasury stock lowers the stock outstanding.

Question 4. Smith Company had retained earnings of $60,000 at the end of the current year. For the current year, income was $30,000 and dividends were $10,000. What was the balance in retained earnings at the end of the prior year?

$20,000
$40,000
$60,000
$50,000

Question 5. The most popular depreciation method for financial reporting is

straight line.
double declining.
units of production.
sum of the years.

Reference no: EM13754674

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