When an FI sells a loan without recourse, what happens to the credit risk of the loan? It is shared between the FI and the buyer. It is transferred to a third party. It is completely eliminated from the FI's balance sheet. It remains partially with the FI.

It is completely eliminated from the FI's balance sheet.

Highly leveraged transaction (HLT) loans are typically characterized by which of the following? They are unsecured, long-term, and have variable rates. They are secured, long-term, and have floating rates. They are unsecured, short-term, and have fixed rates. They are secured, short-term, and have fixed rates.

They are unsecured, short-term, and have fixed rates.

Which of the following is NOT true of loan assignments? The loan buyer holds a direct claim on the borrower Transfer of U.S. domestic loans is normally associated with a Uniform Commercial Code filing Contract terms are unrestrictive from the seller's perspective All rights are transferred on sale

Contract terms are unrestrictive from the seller's perspective

In the concept of good bank/bad bank, what is the role of the bad bank? It is a special purpose vehicle (SPV) organized to liquidate non-performing loans. Assets are funded by FDIC insured deposits. Assets are passed to the institution's correspondent bank. Assets are organized into a closed-end mutual fund.

It is a special purpose vehicle (SPV) organized to liquidate non-performing loans.

On January 1, Jones purchased land and building for $400,000 cash. The appraised values are building ($325,000), and land ($175,000). How much of the $400,000 purchase price will be assigned to the building and land accounts? Land: _____, Building: _____. Land: $160,000, Building: $240,000 Land: $150,000, Building: $250,000 Land: $175,000, Building: $225,000 Land: $140,000, Building: $260,000

Land: $140,000, Building: $260,000

Cedar Fair purchased a new ride for $26,000,000, less a $1,000,000 discount. Cedar Fair paid $125,000 for transportation and $625,000 for installation of the ride. Prepare the journal entry for the acquisition assuming Cedar Fair signed a note payable for the new roller coaster and paid cash for the transportation and installation costs. Debit Equipment _____, Credit Cash _____, Credit Notes Payable _____. Debit Equipment $26,000,000, Credit Cash $750,000, Credit Notes Payable $25,250,000 Debit Equipment $25,750,000, Credit Cash $750,000, Credit Notes Payable $25,000,000 Debit Equipment $25,875,000, Credit Cash $750,000, Credit Notes Payable $25,125,000 Debit Equipment $25,500,000, Credit Cash $750,000, Credit Notes Payable $25,250,000

Debit Equipment $25,750,000, Credit Cash $750,000, Credit Notes Payable $25,000,000

What is the term for the portion of long-term debt that is due within one year? Short-term Debt Current Liability Current portion of long term notes payable Accrued Liability

Current portion of long term notes payable

What is the formula for calculating the adjusting journal entry (AJE) for simple interest? AJE = Principal / Interest Rate AJE = Interest Rate * Principal AJE = Principal * Rate * Time AJE = ST NP principle * % * (#months/12)

AJE = ST NP principle * % * (#months/12)

What is the formula for calculating the adjusting journal entry (AJE) for warranty expense? AJE = Total Sales * Warranty Rate AJE = CY sales * % over entire warranty period AJE = Warranty Expense / Sales AJE = Sales * Warranty Period

AJE = CY sales * % over entire warranty period

What factors contribute to the value of an asset? Depreciation and amortization Current market price and historical cost Expected future cash flows, risk, timing, and opportunity cost Inventory turnover and sales volume

Expected future cash flows, risk, timing, and opportunity cost

What is the formula for the value of an asset at time t? Value of Asset = Vt(CFt, CFt+1, CFt+2...) Value of Asset = Liabilities + Equity Value of Asset = Revenue - Expenses Value of Asset = Cash + Inventory

Value of Asset = Vt(CFt, CFt+1, CFt+2...)

Where is production (operations) positioned in the cycle between fixed assets and inventory? Between fixed assets and inventory Between cash and accounts payable Before fixed assets and after cash After inventory and before sales

Between fixed assets and inventory

What is depreciation, and how does it affect the cash flow-production cycle? Depreciation is the increase in asset value over time. Depreciation increases cash flow by reducing expenses. Depreciation has no effect on the cash flow-production cycle. Depreciation is a non-cash expense that reduces taxable income.

Depreciation is a non-cash expense that reduces taxable income.

Where does accounts payable fit in the cash flow cycle? After cash but before inventory Before inventory and after accounts receivable After sales and before cash Before cash and after inventory

After cash but before inventory

Where does the initial cash for a company typically come from? Depreciation and amortization Accounts payable and receivable Investments by owners or shareholders and loans Sales revenue and inventory turnover

Investments by owners or shareholders and loans

What is the operating (working capital) cycle? Cycle from sales to cash to accounts payable Cycle from fixed assets to inventory to sales Cycle from cash to inventory to accounts receivable back to cash Cycle from accounts payable to cash to inventory

Cycle from cash to inventory to accounts receivable back to cash

Are profits and cash flow the same? How do they differ? Yes, both are calculated from revenue minus expenses. No, profits are cash inflows only; cash flow includes all transactions. Yes, they are the same as both reflect company earnings. No, profits include non-cash expenses; cash flow is actual cash movement.

No, profits include non-cash expenses; cash flow is actual cash movement.

What are the advantages of recording transactions in a journal? Complicates the daily business transaction picture Increases the complexity of accounting processes Reduces error and provides a chronological history of transactions Limits the ability to track business volume

Reduces error and provides a chronological history of transactions

What are the steps to posting the journal to the ledger? Identify the transaction, verify the amount, post to the journal, reconcile the ledger Analyze the transaction, prepare the journal entry, post to the ledger, close the books Locate the account, record the date, enter the amount, calculate the new balance Record the date, record the debit, record the credit, record the explanation

Locate the account, record the date, enter the amount, calculate the new balance

What are the four steps to recording transactions in a journal? Locate the account, record the date, enter the amount, calculate the new balance Identify the transaction, verify the amount, post to the journal, reconcile the ledger Record the date, record the debit, record the credit, record the explanation Analyze the transaction, prepare the journal entry, post to the ledger, close the books

Record the date, record the debit, record the credit, record the explanation

What is a source document in accounting? A document used to bill the customer A summary of all transactions for a given period A report showing the financial position of a company The original transaction record that proves the transaction has occurred

The original transaction record that proves the transaction has occurred

What is a sales invoice? A record of a purchase on account A receipt given at the point of sale A summary of all sales transactions A document used to bill the customer

A document used to bill the customer

What is a purchase invoice? A document used to bill the customer A summary of all purchase transactions The bill received by the purchaser as proof of a purchase on account A receipt given at the point of sale

The bill received by the purchaser as proof of a purchase on account

What is an endorsement in the context of a check? A signature on the back of a check A report showing the financial position of a company A document used to bill the customer A summary of all transactions for a given period

A signature on the back of a check

What is a bank credit memo? Used as the basis for increasing a customer's bank account A document used to bill the customer Used as the basis for decreasing a customer's bank account A summary of all transactions for a given period

Used as the basis for increasing a customer's bank account

What is a bank debit memo? A summary of all transactions for a given period Used as the basis for decreasing a customer's bank account Used as the basis for increasing a customer's bank account A document used to bill the customer

Used as the basis for decreasing a customer's bank account

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