Question 1

Explain the nature of current liabilities and how these are accounted for in the financial statements.

Accepted Answer

Current liabilities are obligations that are expected to be settled within one year of the balance sheet date or the business's normal operating cycle,whichever is longer.Current liabilities are reported separately from non-current liabilities in the balance sheet unless they are presented in order of liquidity to provide more reliable and relevant information.

Question 2

In 2017,Johnson's Cycles Inc.sold 5,000 mountain bikes.For the first time,Johnson offered an in-store,no-charge,two-year warranty on each bike sold.Company management estimates that the average cost of providing the warranty is $8 per unit in the first year of coverage and $11 per unit in the second year.
Johnson's warranty-related expenditures totaled $36,500 for labor costs during 2017.
Requirements:
a.Prepare the summary journal entry to recognize Johnson's warranty expense in 2017.
b.Prepare the summary journal entry to recognize the warranty service provided in 2017.
c.Determine the total provision for warranty obligations that will be reported on the company's balance sheet at year-end.Assuming that all sales transactions and warranty service took place on the last day of the year,how much of the warranty obligation will be classified as a current liability? As a non-current liability?

Accepted Answer

a.   5000 × ($8 + $11)
b.  c.The total provision for warranty obligations that will be reported at year-end is $58,500 ($95,000 - $36,500).Of this amount,$3,500 will be reported as a current obligation [(5000 × $8)- $6,000 = $6,500] and the $55,000 balance as a non-current liability (5000 × $11= $17,500)

Question 3

RJ Magazines sells two-year magazine subscriptions for $108 cash each.The cost of producing and delivering each magazine is $2.75 paid in cash at the time of delivery.RJ's sales activity for the year follows:
Sales activity
• On January 1,2017,RJ sells 22,000 subscriptions.
• On April 1,2017,RJ sells 5,000 subscriptions.
• On November 1,2017,RJ sells 12,000 subscriptions
RJ delivers the magazines at the end of the month and the year-end is December 31.
Requirements:
a.Prepare journal entries to record the subscription sales during the year.
b.Prepare summary journal entries to record the revenue earned during the year and the related expense.

Accepted Answer

a.

Question 4

Which statement about contingencies is correct?

Accepted Answer

A) If the future outcome is possible and reliably measurable,a provision is recorded. 
B) If the future outcome is probable and reliably measurable,a provision is recorded. 
C) If the future outcome is probable,a provision is recorded even if it is not reliably measurable. 
D) If the future outcome is possible,a provision is recorded even if it is not reliably measurable. 
A) If the future outcome is possible and reliably measurable,a provision is recorded. 
B) If the future outcome is probable and reliably measurable,a provision is recorded. 
C) If the future outcome is probable,a provision is recorded even if it is not reliably measurable. 
D) If the future outcome is possible,a provision is recorded even if it is not reliably measurable.

Question 5

Which statement about contingent liabilities is correct?

Accepted Answer

A) It is a possible obligation that arises from past transactions and events. 
B) It is an obligation that arises from past transactions and events. 
C) It involves uncertainty about either the timing or amount of payment. 
D) It is a condition that depends upon the outcome of an anticipated event. 
A) It is a possible obligation that arises from past transactions and events. 
B) It is an obligation that arises from past transactions and events. 
C) It involves uncertainty about either the timing or amount of payment. 
D) It is a condition that depends upon the outcome of an anticipated event.

Question 6

Which statement is not correct?

Accepted Answer

A) Contingencies arise from future events. 
B) The amount to be paid for contingencies is determined by future events. 
C) Current liabilities arise from past events. 
D) The amount to be paid for current liabilities is known or reasonably estimable. 
A) Contingencies arise from future events. 
B) The amount to be paid for contingencies is determined by future events. 
C) Current liabilities arise from past events. 
D) The amount to be paid for current liabilities is known or reasonably estimable.

Question 7

Which statement about contingent liabilities is correct?

Accepted Answer

A) It is a present obligation that will probably result in the economic outflow of resources. 
B) It involves uncertainty about either the timing of payment or the amount of payment. 
C) It is an obligation that arises from past transactions and events and can be reliably measured. 
D) It is a present obligation that arises from past events but it cannot be reliably measured. 
A) It is a present obligation that will probably result in the economic outflow of resources. 
B) It involves uncertainty about either the timing of payment or the amount of payment. 
C) It is an obligation that arises from past transactions and events and can be reliably measured. 
D) It is a present obligation that arises from past events but it cannot be reliably measured.

Question 8

Select transactions and other information pertaining to the Best Place in the World Inc.(BPW)are detailed below.
Facts:
a.BPW is domiciled in Vancouver,British Columbia and all purchases and sales are made in BC.
b.The HST rate in British Columbia is 12%.
c.The balances in BPWs HST recoverable account and HST payable account as at March 31,2012 were $7,000 and $18,000,respectively.
d.BPW uses a perpetual inventory system.
e.Inventory is sold at a 100% mark-up on cost.(Cost of goods sold is 50% of the sales price.)
Select transactions in April 2012:
1.BPW purchased inventory on account at a cost of $17,000 plus HST.
2.BPW purchased equipment on account at a cost of $18,000 plus HST.It paid an additional $600 plus HST for shipping.
3.Cash sales-BPW sold inventory for $45,000 plus HST.
4.Sales on account-BPW sold inventory for $35,000 plus HST.
5.BPW paid the supplier in full for the equipment previously purchased on account.
6.At the end of the month,BPW remitted the net amount of HST owing to the Canada Revenue Agency.
Requirement:
Prepare summary journal entries to record the transactions detailed above.

Accepted Answer

Summary jo

Question 9

Which statement is not correct under the IFRS Framework?

Accepted Answer

A) A reliable estimate for an asset is presumed to exist. 
B) A provision exists if the timing of payment is uncertain. 
C) A provision exists if the amount of payment is uncertain. 
D) A reliable estimate for a liability is presumed to exist. 
A) A reliable estimate for an asset is presumed to exist. 
B) A provision exists if the timing of payment is uncertain. 
C) A provision exists if the amount of payment is uncertain. 
D) A reliable estimate for a liability is presumed to exist.

Question 10

Which statement is not correct?

Accepted Answer

A) A bank loan due in 5 years is a non-financial liability. 
B) Bonds payable are financial liabilities. 
C) Sales taxes payable are non-financial liabilities. 
D) A bank loan due in 90 days is a financial liability. 
A) A bank loan due in 5 years is a non-financial liability. 
B) Bonds payable are financial liabilities. 
C) Sales taxes payable are non-financial liabilities. 
D) A bank loan due in 90 days is a financial liability.

Question 11

Which statement is correct?

Accepted Answer

A) Trade payables are supported by a written promise to pay. 
B) Trade payables with no stated interest rate do not need to be discounted. 
C) Notes payable are legally enforceable and can only be interest bearing. 
D) Notes payables are recognized at the face value or transaction price. 
A) Trade payables are supported by a written promise to pay. 
B) Trade payables with no stated interest rate do not need to be discounted. 
C) Notes payable are legally enforceable and can only be interest bearing. 
D) Notes payables are recognized at the face value or transaction price.

Question 12

Deck Contractors Inc.(DC)enters into a contract to construct six decks adjacent to a commercial building.The purchaser has agreed to pay $8,500 for each deck (total $51,000).The terms of the contract call for a 40% deposit ($3,400 per deck)at time of contract signing and payment of the balance ($5,100 per deck)as each deck is completed.
The contract is signed on October 1,2014.Two decks are completed in 2014 and the balance in 2015.DC has a December 31 year-end.The cost to DC of constructing each deck is $3,400,which it pays in cash.
Requirements:
a.Prepare summary journal entries for 2014 and 2015.
b.What is the balance in the deferred revenue account as at December 31,2014?

Accepted Answer

a.Summary journal entries @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& b

Question 13

Which statement about contingencies is correct?

Accepted Answer

A) If the future outcome is possible and reliably measurable,a provision is recorded. 
B) If the future outcome is possible,but reliably measurable,no action is required. 
C) If the future outcome is possible,but not reliably measurable,no action is required. 
D) If the future outcome is possible,but reliably measurable,disclosure is required. 
A) If the future outcome is possible and reliably measurable,a provision is recorded. 
B) If the future outcome is possible,but reliably measurable,no action is required. 
C) If the future outcome is possible,but not reliably measurable,no action is required. 
D) If the future outcome is possible,but reliably measurable,disclosure is required.

Question 14

Explain the meaning of the following terms: current assets,trade payables,expected value,deferred revenue and warranty.

Accepted Answer

Current assets: Assets that are expected

Question 15

Which statement is not correct about notes payable?

Accepted Answer

A) Notes payable are supported by a written promise to pay. 
B) Non-interest bearing notes are recognized at their fair value. 
C) Non-interest bearing notes are recognized at the transaction price. 
D) Fair value can be estimated by using discounted cash flow. 
A) Notes payable are supported by a written promise to pay. 
B) Non-interest bearing notes are recognized at their fair value. 
C) Non-interest bearing notes are recognized at the transaction price. 
D) Fair value can be estimated by using discounted cash flow.

Question 16

Which statement is correct?

Accepted Answer

A) Contingencies arise from future events. 
B) The amount to be paid for contingencies is known or reasonably estimable. 
C) Current liabilities arise from future events. 
D) The amount to be paid for current liabilities is known or reasonably estimable. 
A) Contingencies arise from future events. 
B) The amount to be paid for contingencies is known or reasonably estimable. 
C) Current liabilities arise from future events. 
D) The amount to be paid for current liabilities is known or reasonably estimable.

Question 17

Which statement about liabilities is not correct?

Accepted Answer

A) Current liabilities are those that can be settled within one year. 
B) Current liabilities are those that can be settled within one operating cycle. 
C) Current liabilities are normally presented together with non-current liabilities. 
D) Certain held for trading liabilities can also be reported as current liabilities. 
A) Current liabilities are those that can be settled within one year. 
B) Current liabilities are those that can be settled within one operating cycle. 
C) Current liabilities are normally presented together with non-current liabilities. 
D) Certain held for trading liabilities can also be reported as current liabilities.

Question 18

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

Accepted Answer

Sale of go

Question 19

Which of the following characteristic is required for a "liability" under IFRS Framework?

Accepted Answer

A) Arises from a past transaction. 
B) Arises from a non-financial transaction. 
C) Arises from a future transaction. 
D) Arises from a forecasted transaction. 
A) Arises from a past transaction. 
B) Arises from a non-financial transaction. 
C) Arises from a future transaction. 
D) Arises from a forecasted transaction.

Question 20

Which is a reason to use the net method to record purchase discounts?

Accepted Answer

A) Cost-benefit factor is greater for the net method. 
B) Reporting "purchase discounts lost" signifies inefficient business practices. 
C) Given the materiality of the amounts involved,the net method is used. 
D) The net method is technically superior to the gross method. 
A) Cost-benefit factor is greater for the net method. 
B) Reporting "purchase discounts lost" signifies inefficient business practices. 
C) Given the materiality of the amounts involved,the net method is used. 
D) The net method is technically superior to the gross method.

Explain the nature of current liabilities and how these are accounted for in the financial statements.

Which statement about contingencies is correct?

Which statement about contingent liabilities is correct?

Which statement is not correct?

Which statement about contingent liabilities is correct?

Which statement is not correct under the IFRS Framework?

Which statement is not correct?

Which statement is correct?

Which statement about contingencies is correct?

Explain the meaning of the following terms: current assets,trade payables,expected value,deferred revenue and warranty.

Which statement is not correct about notes payable?

Which statement is correct?

Which statement about liabilities is not correct?

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

Which of the following characteristic is required for a "liability" under IFRS Framework?

Which is a reason to use the net method to record purchase discounts?

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters

Exam 11: Current Liabilities and Contingencies

Explain the nature of current liabilities and how these are accounted for in the financial statements.

Which statement about contingencies is correct?

Which statement about contingent liabilities is correct?

Which statement is not correct?

Which statement about contingent liabilities is correct?

Which statement is not correct under the IFRS Framework?

Which statement is not correct?

Which statement is correct?

Which statement about contingencies is correct?

Explain the meaning of the following terms: current assets,trade payables,expected value,deferred revenue and warranty.

Which statement is not correct about notes payable?

Which statement is correct?

Which statement about liabilities is not correct?

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

Which of the following characteristic is required for a "liability" under IFRS Framework?

Which is a reason to use the net method to record purchase discounts?

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters