Exam 9: Reporting and Interpreting Liabilities

The accounts payable turnover ratio is difficult to manipulate.

Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2015. In 2014, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2015 is closest to:

The journal entry to record a contingent liability creates an accrued liability on the balance sheet and a loss on the income statement.

Working capital decreases when a company pays taxes payable.

Wolf Company borrowed $5,000 on an 8% note payable on April 1, 2014. The maturity date of the note (and payment of all interest) is July 1, 2015. The accounting period ends December 31. Assume no adjusting entries are made during the year. Required: Prepare the journal entry for each of the following dates: A. April 1, 2014 B. December 31, 2014 C. July 1, 2015

Young Company is involved in a lawsuit. When would the lawsuit be recorded as a liability on the balance sheet?

An annuity is a series of consecutive payments, each one increasing by a fixed dollar amount over the payment amount of the prior year.

In a recent year, The Walt Disney Company reported the following increases and decreases in current assets and current liabilities. Required: Identify whether each of these increases or decreases caused cash to increase or decrease. Enter an I if the change in the account balance caused an increase in cash flow or enter a D if the change in the account balance caused a decrease in cash flow. $\text { Changes in current assets and liabilities (in millions) }$ Account Account Balance Change Cash Effect (+/-) Receivables-CA Decrease \ 366 1. Inventories-CA Decrease \ 103 2. Film and television costs-CA Increase \ 848 3. Current portion of borrowings-CL Increase \ 292 4. Unearned royalties-CL Sncease In 69 5.

Failure to make a necessary adjusting entry for accrued interest on a note payable would result in which of the following?

The following is a partial list of account balances for Coen, Inc. as of December 31, 2014. Accounts payable \ 5,000 Accounts receivable 6,000 Bonds payable (100\% due in 10 years) 40,000 Mortgage payable (10\% due within one year) 10,000 Notes payable (due in six months) 2,000 Salaries payable 800 Sales revenue 49,000 Income taxes payable 8,000 Unearned revenue 800 Required: Prepare the liabilities section of Coen Inc.'s classified balance sheet for December 31, 2014.

An annuity is a series of consecutive and unequal payments over time.

Working capital increases when a company accrues sales revenue at year-end.

Which of the following correctly describes the accounting for leases?

Which of the following is not a current liability?

Rachel Corporation purchased a building by paying $90,000 cash on the purchase date, agreeing to pay $50,000 every year for the next nine years and one payment of $100,000 ten years from the purchase date. The first payment is due one year after the purchase date. Rachel's incremental borrowing rate is 10%. The building reported on the balance sheet as of the purchase date is closest to:

Rusty Corporation purchased a rust-inhibiting machine by paying $50,000 cash on the purchase date and agreeing to pay $10,000 every three months during the next two years. The first payment is due three months after the purchase date. Rusty's incremental borrowing rate is 8%. The machine reported on the balance sheet as of the purchase date is closest to:

Which of the following statements is incorrect?

Grant Corporation is looking to purchase a building costing $900,000 by paying $300,000 cash on the purchase date, and agreeing to make payments every three months for the next five years. The first payment is due three months after the purchase date. Grant's incremental borrowing rate is 8%. Each of the payments is closest to:

You have a goal of having $100,000 five years from today. The return on the investment is expected to be 10% and will be compounded semi-annually. The amount that needs to be invested today is closest to:

Border Company purchased a truck that cost $17,000. The company signed a $17,000 note payable that specified four equal annual payments (at each year-end), each of which includes a payment on the principal and interest on the unpaid balance at 10% per annum. Requirements: A. Calculate the amount of each equal payment (round your answer to the nearest whole dollar amount). B. Prepare the journal entry to record the purchase of the truck. C. Prepare the journal entry to record the first annual payment on the note (assume no interest has been accrued during the year). D. Will the interest paid with the first annual payment be more than, or less than, the interest paid with the second annual payment? Explain your answer.