Which ratio will increase in a liability fraud?
a. Accounts payable ÷ purchases
b. Interest expense ÷ notes payable
c. Total liabilities ÷ total assets
d. Lease expense ÷ total fixed assets
b
FEEDBACK: a. Incorrect. Purchases will remain the same, but accounts payable will fall.
b. Correct. Interest expense will be high while notes payables will be reduced.
c. Incorrect. Liabilities will be understated.
d. Incorrect. Lease expense will be understated.
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A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate. In making the transition to using multiple predetermined overhead allocation rates, which of the following statements is incorrect?
A) With multiple overhead rates, there are multiple cost pools. B) Management must analyze the expected overhead costs and separate them into a cost pool for each department. C) With multiple overhead rates, there is one cost pool and multiple allocation bases. D) The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate.
Given taxes and bankruptcy costs exist, as financial leverage increases, the weighted average cost of
capital first decreases and then increases. Indicate whether the statement is true or false
As with a sole proprietorship, one disadvantage of a partnership is a lack of continuity.
Answer the following statement true (T) or false (F)
A type of asset in which a customer owes the company money would be a:
A) dividend. B) receivable. C) payable. D) sale.