A304 Latest Exam 3 Questions and All
Correct Answers 2025-2026 Updated.
capital structure - Answer mixture of debt and equity to finance operations
debt - Answer borrowed from creditors
equity - Answer invested by owners
debt is _______ than equity bc - Answer risker:
-debt payments are legal obligations
-creditors can force bankruptcy
-creditors can require sale of assets
liabilities recorded at - Answer current cash equivalent
current cash equivalent - Answer cash amount a creditor would accept to settle the liability
immediately
present value - Answer value owed, not amount paid
interest expense for short-term notes payable - Answer amt. owed*annual interest rate*# of
months/12
non-interest bearing note - Answer -no payments of principal or interest until maturity date
-accrue interest expense and interest payable every period
-liability balance increases throughout loan
installment notes - Answer -fixed payments of principal and interest each period
-loan balance decreases each period
-interest expenses decreases each period
, short-term non-interest bearing loan - Answer amount owed = amount originally borrowed
no PV calculated
long-term non-interest bearing loan - Answer PV of loan = amount of original loan balance
installment loans examples - Answer car loans
mortgage loans
notes payable bond value - Answer (principal payment*PV) + (interest payments*PV annuity)
contingent liabilities - Answer potential liabilities created as a result of a past event and will be
resolved when one or more events occurs or fails to occurs
contingent liabilities examples - Answer lawsuits
product warranties
environmental issues
probable contingent liability - Answer highly likely
-record as liability
reasonably possible contingent liability - Answer more than remote but less than likely
-disclose in note
remote contingent liability - Answer slight to no chance
-disclosure not required
range of contingent liability recorded at - Answer low end of range
GAAP probable contingent liability - Answer >70%
likely
Correct Answers 2025-2026 Updated.
capital structure - Answer mixture of debt and equity to finance operations
debt - Answer borrowed from creditors
equity - Answer invested by owners
debt is _______ than equity bc - Answer risker:
-debt payments are legal obligations
-creditors can force bankruptcy
-creditors can require sale of assets
liabilities recorded at - Answer current cash equivalent
current cash equivalent - Answer cash amount a creditor would accept to settle the liability
immediately
present value - Answer value owed, not amount paid
interest expense for short-term notes payable - Answer amt. owed*annual interest rate*# of
months/12
non-interest bearing note - Answer -no payments of principal or interest until maturity date
-accrue interest expense and interest payable every period
-liability balance increases throughout loan
installment notes - Answer -fixed payments of principal and interest each period
-loan balance decreases each period
-interest expenses decreases each period
, short-term non-interest bearing loan - Answer amount owed = amount originally borrowed
no PV calculated
long-term non-interest bearing loan - Answer PV of loan = amount of original loan balance
installment loans examples - Answer car loans
mortgage loans
notes payable bond value - Answer (principal payment*PV) + (interest payments*PV annuity)
contingent liabilities - Answer potential liabilities created as a result of a past event and will be
resolved when one or more events occurs or fails to occurs
contingent liabilities examples - Answer lawsuits
product warranties
environmental issues
probable contingent liability - Answer highly likely
-record as liability
reasonably possible contingent liability - Answer more than remote but less than likely
-disclose in note
remote contingent liability - Answer slight to no chance
-disclosure not required
range of contingent liability recorded at - Answer low end of range
GAAP probable contingent liability - Answer >70%
likely
