ACC5310 EXAM 2 | QUESTIONS AND ANSWERS | 2026
UPDATE | WITH COMPLETE SOLUTION.
100% Correct 156
Incorrect 0
1 of 156
Term
EZ Wheels Corporation manufactures kick scooters. The company
offers a one-year warranty on all scooters. During the year, the
company recorded net sales of $1,520 million. Historically, about 4%
of all sales are returned under warranty and the cost of repairing
and or replacing goods under warranty is about 30% of retail value.
Assume that at the start of the year EZ Wheels' balance sheet
included an accrued warranty liability of $13.0 million and at the
end of the year, the accrued warranty liability balance was $9.9
million.
How much did EZ Wheels pay during the year to repair and/or
replace scooters under warranty?
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$635 million
The pension expense for the period is computed as follows: Service cost +
interest cost + amortization of deferred amounts - expected return on pension
plan assets:$937 + $744 + $40 - $1,086 = $635
, $2,160 million
$2,077 / $159,773 = 1.3%$159,773 million x 1.04 = $166,164 million x 1.3% = $2,160
million
$21.3 million
Total cash paid out is $13.0 million + $18.2 million - $9.9 million = $21.3
million. $1,520 million x 4% x 30% = $18.2 million (warranty expense)
$231.8 million
Of the $981.8 million total restructuring charge, only the exit costs and severance
costs must eventually be settled in cash. The asset write downs are not accrued
— they reduce the assets on the balance sheet. The company accrued $94
million +
$240.8 million = $334.8 million as a liability. Thus, if the company paid $103 million
cash, the remaining accrual is $231.8 million at year end.
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2 of 156
Term
The market rate of interest is equal to the risk-free rate plus a risk
premium.
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None of the above False
Net nonoperating obligations
True (NNO)
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3 of 156
Term
In general, how do credit analysts determine the risk-free rate?
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The yield on U.S. Government
borrowings The average corporate bond yield
The interest rate On The dividend yield On Preferred
Commercial loans stocks
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4 of 156
Term
Acadia, Inc. recorded restructuring charges of $188,434 thousand
during the year related entirely to anticipated employee separation
payments. Acadia, Inc. had never before incurred restructuring
charges. At the end of the year, the company's balance sheet
included a restructuring accrual of $23,714 thousand.
The cash flow effect of Acadia's restructuring during the year was
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, $164,720 thousand
The total restructuring charge accrued was $188,434 thousand of which
$23,714 thousand was still unpaid (a liability) at the end of the year. The
difference of $164,720 thousand must have been paid in cash during the
year. The cash flow effect is $164,720 thousand
There is not enough information to determine the amount
The tax expense will be a function of forecasted pre-tax income. Knowing the
sales growth rate is insufficient to determine pre-tax income because certain
expenses may remain unchanged from prior dollar levels.
$18,000 loss
Net book value = ( $634,500 x 0.98) + $7,380 = $629,190 Gain (loss) = $629,190 - (
$634,500 x 1.02) = $(18,000)
$435,930
Using a financial calculator or Excel the present value of the bonds = $435,930
Excel
Rate =2%
Nper =10
PMT =-12000
FV =-400000
Type =0
Don't know?
UPDATE | WITH COMPLETE SOLUTION.
100% Correct 156
Incorrect 0
1 of 156
Term
EZ Wheels Corporation manufactures kick scooters. The company
offers a one-year warranty on all scooters. During the year, the
company recorded net sales of $1,520 million. Historically, about 4%
of all sales are returned under warranty and the cost of repairing
and or replacing goods under warranty is about 30% of retail value.
Assume that at the start of the year EZ Wheels' balance sheet
included an accrued warranty liability of $13.0 million and at the
end of the year, the accrued warranty liability balance was $9.9
million.
How much did EZ Wheels pay during the year to repair and/or
replace scooters under warranty?
Give this one a try later!
$635 million
The pension expense for the period is computed as follows: Service cost +
interest cost + amortization of deferred amounts - expected return on pension
plan assets:$937 + $744 + $40 - $1,086 = $635
, $2,160 million
$2,077 / $159,773 = 1.3%$159,773 million x 1.04 = $166,164 million x 1.3% = $2,160
million
$21.3 million
Total cash paid out is $13.0 million + $18.2 million - $9.9 million = $21.3
million. $1,520 million x 4% x 30% = $18.2 million (warranty expense)
$231.8 million
Of the $981.8 million total restructuring charge, only the exit costs and severance
costs must eventually be settled in cash. The asset write downs are not accrued
— they reduce the assets on the balance sheet. The company accrued $94
million +
$240.8 million = $334.8 million as a liability. Thus, if the company paid $103 million
cash, the remaining accrual is $231.8 million at year end.
Don't know?
2 of 156
Term
The market rate of interest is equal to the risk-free rate plus a risk
premium.
Give this one a try later!
None of the above False
Net nonoperating obligations
True (NNO)
, Don't know?
3 of 156
Term
In general, how do credit analysts determine the risk-free rate?
Give this one a try later!
The yield on U.S. Government
borrowings The average corporate bond yield
The interest rate On The dividend yield On Preferred
Commercial loans stocks
Don't know?
4 of 156
Term
Acadia, Inc. recorded restructuring charges of $188,434 thousand
during the year related entirely to anticipated employee separation
payments. Acadia, Inc. had never before incurred restructuring
charges. At the end of the year, the company's balance sheet
included a restructuring accrual of $23,714 thousand.
The cash flow effect of Acadia's restructuring during the year was
Give this one a try later!
, $164,720 thousand
The total restructuring charge accrued was $188,434 thousand of which
$23,714 thousand was still unpaid (a liability) at the end of the year. The
difference of $164,720 thousand must have been paid in cash during the
year. The cash flow effect is $164,720 thousand
There is not enough information to determine the amount
The tax expense will be a function of forecasted pre-tax income. Knowing the
sales growth rate is insufficient to determine pre-tax income because certain
expenses may remain unchanged from prior dollar levels.
$18,000 loss
Net book value = ( $634,500 x 0.98) + $7,380 = $629,190 Gain (loss) = $629,190 - (
$634,500 x 1.02) = $(18,000)
$435,930
Using a financial calculator or Excel the present value of the bonds = $435,930
Excel
Rate =2%
Nper =10
PMT =-12000
FV =-400000
Type =0
Don't know?
