D104 Intermediate Accounting II - Set 1 - Part 3

Correct Answer: Gain

When the reacquisition price of a bond is less than its net carrying amount, the difference is recognized as a gain from extinguishment of debt.

Correct Answer: Loss

If the reacquisition price is higher than the net carrying amount, the difference is recorded as a loss from extinguishment of debt.

Correct Answer: Debt to assets ratio

The debt to assets ratio measures the proportion of a companys assets that are financed by debt and is calculated by dividing total liabilities by total assets.

Correct Answer: Asset turnover

Asset turnover measures how efficiently a company is using its assets to generate revenue by dividing net sales by average total assets.

Correct Answer: Profit margin on sales

Profit margin on sales indicates how much of each dollar of sales results in profit, and is calculated by dividing net income by net sales.

Correct Answer: Return on assets

Return on assets (ROA) measures how effectively a company is using its assets to generate profit by dividing net income by average total assets.

Correct Answer: Long-term debt

Long-term debt is a non-current liability because it is not due within the next fiscal year, unlike the other options, which are current liabilities.

Correct Answer: Risk of loss from catastrophes assumed by insurance companies

Contingencies such as the risk of loss from catastrophes are not accrued unless the loss is probable and can be reasonably estimated.

Correct Answer: Activity method

The activity method, also known as the units-of-production method, allocates depreciation based on the actual usage or productivity of an asset rather than the passage of time.

Correct Answer: For assets held for disposal

Restoration of impairment losses is permitted only for assets held for disposal, not for those held for use or already disposed of.