The Client May Use a Variety of Methods to Understate

question 85

Multiple Choice

The client may use a variety of methods to understate liabilities,interest expense and long-term debt.These include

• A)Recording operating leases as capital leases to avoid putting the liability on the balance sheet.
• B)Failing to disclose long-term agreements.
• C)Failing to disclose special debt arrangements,such as transactions with special purpose entities in an attempt to keep debt arrangements off the books.
• D)Failing to disclose related-party transactions.Debt associated with related-parties may carry a higher risk than debt associated with non-related parties.
• E)both A and B
• F)both B and E
• G)both C and D

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Definitions:

Variable Manufacturing Costs

Costs that vary directly with the level of production output, including materials, labor, and overhead expenses that change as production levels change.

Selling Price

The amount a seller charges for a product or service, determined by costs, market conditions, and competitive pricing.

Contribution Margin

The amount by which the sales price of a product exceeds its variable costs, used to cover fixed costs and generate profit.

Selling Price

The amount of money for which a product or service is sold to customers, determined by costs, market demand, and competition.