Exam 11: Current Liabilities and Contingencies

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

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year end and that the company does not prepare interim statements.Round all amounts to nearest dollar.

AV Airlines sold a ticket on May 1,2012 for travel on Jun 15,2012 for $1,500.The customer paid at time of booking the flight.Provide the necessary journal entries.

On January 1,2014 BCL Transmission Services Co.issued a $40,000,non-interest bearing note,due on January 1,2015,in exchange for a custom-built computer system.The fair value of the computer system is not easily determinable.The market rate of interest for similar transactions is 4%.BCL's year-end is December 31. Requirements: a.Prepare the journal entry to record the issuance of the note payable. b.Prepare the journal entry to record the accrual of interest at December 31,2014,assuming that BCL prepares adjusting entries only at year-end. c.Prepare the journal entry to record the retirement of the note payable on January 1,2015.

Which statement is correct?

Which statement is correct about provisions,contingent assets and contingent liabilities?

Which statement about warranties is correct?

Which is an example of a liability?

A clothing store maintains a loyalty program for its customers.Members receive points for every purchase which do not expire.In fiscal 2012,the store made sales of $1 million and awarded 50,000 points that have a fair value of $50,000.The company estimates that approximately 75% of these points will be redeemed by members.Members redeemed 10,000 points in fiscal 2013. Provide the necessary journal entries for fiscal 2012 and 2013.

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

It is early in February 2017 and you are conducting the audit of Blast Off Airline's 2016 financial statements.Through discussion with Blast Off's Chief Financial Officer you learn of matters that have not yet been incorporated into the 2016 financial statements: During 2016,Blast Off began a customer loyalty program.For each aeronautical mile that a passenger travels on a paid flight,the passenger accrues one flight mile.Passengers can redeem accrued flight miles for free air travel.Earned miles do not expire.Blast Off's analysis of its competitors' programs suggests an average redemption rate of 55%.In 2016,Blast Off awarded 50,000,000 flight miles,1,375,000 of which were redeemed.Management estimates the fair value of the flight miles is $540,000. Requirement: Prepare the journal entries to record the required adjustments for the above event.

Which statement is correct about financial and non-financial liabilities?

Explain the meaning of "provision" and give an example.

St.John Laurulry (SJL)recently hired Huck as its payable clerk,a position that has been vacant for two months.While the other accounting staff have taken care of the "must do's," there are a number of transactions that have not yet been recorded. • Nov.15,2017-SJL purchases $8,000 supplies inventory on account.The terms offered are 2/10,net 30. • Nov.22,2017-SJL purchases 10 washing machines.SJL issues a $3,000 non-interest bearing note payable due on 01/15/18. • Nov.28,2017-SJL borrows $131,400 from the bank.SJL signs a demand note for this amount and authorizes the bank to take the interest payments from its bank account.Interest is payable monthly at 10% per annum. • Dec.18,2017-SJL purchases $1,000 supplies inventory on account.The terms offered are 2/10,net 30. • Dec.21,2017-SJL purchases 15 dryers.SJL issues a $25,000 non-interest bearing note payable due on Dec.21,2018. • Dec.22,2017-Huck pays the Nov.15,2017 and Dec.18,2017 invoices. • Dec.31,2017-Huck processes the payroll for the month.The gross payroll is $80,000; $2,700 is withheld for the employees' Canada Pension Plan and Employment Insurance premiums. Other Info • SJL uses the net method to record accounts payable. • SJL's year-end is Dec.31 and interim statements are normally prepared on a monthly basis. • Due to the vacancy in the accounting department,SJL's latest interim statements are for the period ended Oct.31,2017.The necessary accruals were made at that time. • The market rate of interest for SJL's short-term borrowings is 10%. Requirements: a.Prepare journal entries to record the documented events and the necessary accruals for the months of November and December.Compute interest accruals based on the number of days,rather than months. b.Contrast the gross and net methods of accounting for trade payables.

Gladstone Distributors Inc.entered into a non-cancellable contract to buy 40,000 litres of linseed oil for $6 per litre for resale purposes.Gladstone intends to resell the oil to retail paint outlets for $10 per litre.The contract was entered into on October 31,2016 for delivery on January 15,2017.Gladstone's year-end is December 31.On December 12,2016,Gladstone's supplier reduces the price to $5.10 per litre due to adverse market conditions. Requirements: a.Outline the required accounting treatment assuming that Gladstone expects it can sell the oil for $6.45 per litre. b.Outline the required accounting treatment assuming that Gladstone expects it can sell the oil for $5.55 per litre.

Which statement is not correct?

Which is not an example of a non-financial liability?

Which statement is correct under the IFRS definition for a "liability"?

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