FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Current Liabilities and Contingencies

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following is not a characteristic of a liability?

A) It represents a probable, future sacrifice of economic benefits.
B) It must be payable in cash.
C) It arises from present obligations to other entities.
D) It results from past transactions or events.

E) A) and C)
F) A) and D)

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Branch Company, a building materials supplier, has $18,000,000 of notes payable due April 12, 2010. At December 31, 2009, Branch signed an agreement with First Bank to borrow up to $18,000,000 to refinance the notes on a long-term basis. The agreement specified that borrowings would not exceed 75% of the value of the collateral that Branch provided. At the date of issue of the December 31, 2009, financial statements, the value of Branch's collateral was $20,000,000. On its December 31, 2009, balance sheet, Branch should classify the notes as follows:

A) $15,000,000 long-term and $3,000,000 current liabilities.
B) $4,500,000 short-term and $13,500,000 current liabilities.
C) $18,000,000 of current liabilities.
D) $18,000,000 of long-term liabilities.

E) A) and D)
F) B) and C)

Correct Answer

verified

Show Answer

Question 53

Multiple Choice

Review LaterAdd Note

Paul Company issues a product recall due to an apparently pre-existing and material defect discovered after the end of its fiscal year. Financial statements have not yet been issued. The action required of Paul Company for this reasonably estimable contingency for the year just ended is:

On January 1, 2009, G Corporation agreed to grant its employees two weeks vacation each year, with the stipulation that vacations earned each year can be taken the following year. For the year ended December 31, 2009, G's employees each earned an average of $800 per week. 500 vacation weeks earned in 2009 were not taken during 2009. Wage rates for employees rose by an average of 5 percent by the time vacations actually were taken in 2010. What is the amount of G's 2010 wages expense related to 2009 vacation time?

On September 1, 2009, Triton Entertainment borrowed $24 million cash to fund a new Fun Park. The loan was made by Nevada Bank under a noncommitted short-term line of credit arrangement. Triton issued a 9-month, 12% promissory note. Interest was payable at maturity. Triton's fiscal period is the calendar year. Required: 1. Prepare the journal entry for the issuance of the note by Triton. 2. Prepare the appropriate adjusting entry for the note by Triton on December 31, 2009. 3. Prepare the journal entry for the payment of the note at maturity.

The main difference between accounting for rebate and cash discount coupons is:

The following selected transactions relate to liabilities of Chicago Glass Corporation (Chicago) for 2009. Chicago's fiscal year ends on December 31. 1. On January 15, Chicago received $7,000 from Henry Construction toward the purchase of $66,000 of plate glass to be delivered on February 6. 2. On February 3, Chicago received $6,700 of refundable deposits relating to containers used to transport glass components. 3. On February 6, Chicago delivered the plate glass to Henry Construction and received the balance of the purchase price. 4. First quarter credit sales totaled $700,000. The state sales tax rate is 4% and the local sales tax rate is 2%. Required: Prepare journal entries for the above transactions.

When a deposit on returnable containers is forfeited, the firm holding the deposit will experience:

In 2009, Cap City Inc. introduced a new line of televisions that carry a two-year warranty against manufacturer's defects. Based on past experience with similar products, warranty costs are expected to be approximately 1% of sales during the first year of the warranty and approximately an additional 3% of sales during the second year of the warranty. Sales were $6,000,000 for the first year of the product's life and actual warranty expenditures were $29,000. Assume that all sales are on credit. Required: 1. Prepare journal entries to summarize the sales and any aspects of the warranty for 2009. 2. What amount should Cap City report as a liability at December 31, 2009?

Captain Cook Cereal includes one coupon in each package of Granola that it sells and offers a puzzle in exchange for $2.00 and 3 coupons. The puzzles cost Captain Cook $3.50 each. Experience indicates that 20% of the coupons eventually will be redeemed. During the last month of 2009, the first month of the offer, Captain Cook sold 6 million boxes of Granola and 900,000 of the coupons were redeemed. What amount should Captain Cook report as a liability for coupons on its December 31, 2009, balance sheet?

What is the expense that Holyoak should report for its promotional rebates in its 2009 income statement?

A discount on a noninterest-bearing note payable is classified in the balance sheet as:

The rate of interest printed on the face of a note payable is called the:

Slotnick Chemical received customer deposits on returnable containers in the amount of $300,000 during 2009. Fifteen percent of the containers were not returned. The deposits are based on the container cost marked up 20%. How much profit did Slotnick realize on the forfeited deposits?

Assume the same facts as in question 142. What is the frequent flyer program liability that ALA should report in its December 31, 2009 balance sheet?

Which of the following is a contingency that should be accrued?

On November 1, 2009, Ziegler Products issued a $200,000, 9-month, noninterest-bearing note to the bank. Interest was discounted at a 12% discount rate. Required: 1. Prepare the appropriate journal entry by Ziegler to record the issuance of the note. 2. Determine the effective interest rate. 3. Suppose the note had been structured as a 12% note with interest and principal payable at maturity. Prepare the appropriate journal entry to record the issuance of the note by Ziegler. 4. Prepare the appropriate journal entry on December 31, 2009, to accrue interest expense on the note described in 3. for the 2009 financial statements.

Texon Oil is being sued for price fixing and environmental damage. The litigation started this year and is expected to last five years. There is no doubt that Texon is guilty but the settlement cost will be between $3 billion and $22 billion. Briefly explain how Texon would address this in its current year financial statements.

The key accounting considerations relating to accounts payable are:

Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet?