When a Portion of Inventories Has Been Pledged as Security

question 69

Multiple Choice

When a portion of inventories has been pledged as security on a loan,

• A) the value of the portion pledged should be subtracted from the debt.
• B) an equal amount of retained earnings should be appropriated.
• C) the fact should be disclosed but the amount of current assets should not be affected.
• D) the cost of the pledged inventories should be transferred from current assets to noncurrent assets.

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Definitions:

Thurstone's Theory

A psychological theory suggesting that attitudes can be quantified through the use of scaled opinion statements, leading to the measurement of psychological attitudes.

Crystallized Intelligence

A form of intelligence characterized by the ability to use learned knowledge and experience.

Fluid Intelligence

The capacity to think logically and solve problems in novel situations, independent of acquired knowledge.

Inductive Reasoning

A method of reasoning in which conclusions are drawn from a set of observations, making broad generalizations from specific instances.