Which of the following is not a true statement? a. Companies that are believed to have high bankruptcy risk generally receive lo
w credit ratings and must pay a higher interest rate for borrowing. b. As a company's level of debt increases, the risk of bankruptcy increases. c. Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible. d. The mixture of liabilities and stockholders' equity a business uses is called its capital structure.
Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible is not a true statement. It does not involve other companies getting payed for one companies sales.
Explanation: In case of companies having both debt and equity in its capital structure only the interest paid on debt is deductible to tax and the dividends distribution to stockholders is done from the net income which is computed after deducting tax.
Thus, from the above explanation we can conclude that option c is incorrect statement.
<span>lower-of-cost-or-market
It is inconsistent because losses are recognized but not gains.
b. It usually understates assets.
c. It can increase future income.
"market" in the lower-of-cost-or-market rule be more than
estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal.
Designated market value
is always the middle value of replacement cost, net realizable value, and net realizable value less a normal profit margin
Lower-of-cost-or-market is most conservative if applied to individual items of inventory.
the rationale behind the ceiling when applying the lower-of-cost-or-market method to inventory is to prevent overstatement of the value of obsolete or damaged inventories.</span>
Explanation: In the incubation stage the person moves away from the problem and gives space to the mind to search for a solution. An example is going for a walk to relax your mind a bit and ideas flow better.
