In Return for Promising to Make Future Payments, a Firm

question 73

Multiple Choice

In return for promising to make future payments, a firm receives cash or other assets with a measurable cash-equivalent value.The firm records a long-term liability for that amount and determines the market interest rate by finding the

• A)internal rate of return.
• B)external rate of return.
• C)applicable federal rate.
• D)prime lending rate published in The Wall Street Journal.
• E)federal funds rate.

---

Definitions:

Gross Profit Method

An inventory estimating method that calculates cost of goods sold based on gross profit margin, used for interim financial statements or when inventory is destroyed.

Gross Margin Ratio

A financial metric that indicates the percentage of sales revenue remaining after deducting the cost of goods sold (COGS), used to assess a company's financial health.

Financial Statements

Reports that detail the financial performance of a company, typically including the balance sheet, income statement, and cash flow statement.

LIFO

A method to value inventory that assumes the latest items added to inventory are the first ones used or sold.