Question 1

Operating liabilities are short-term obligations.

Accepted Answer

A) True 
 B)False

Question 2

By recording a contingent gain, a company recognizes revenue when it is realized.

Accepted Answer

A) True 
 B)False

Question 3

Because the sale of a service-type warranty increases sales revenue, the seller should recognize the expense of providing that warranty in the year of sale.

Accepted Answer

A) True 
 B)False

Question 4

The sales tax liability account is debited when the seller collects sales taxes from customers.

Accepted Answer

A) True 
 B)False

Question 5

If a company is able to estimate the rate of redemption for gift cards, they should use the ________ method to account for breakage.

Accepted Answer

A)  proportional 
B)  accrual 
C)  remote 
D)  credit 
A)  proportional 
B)  accrual 
C)  remote 
D)  credit

Question 6

What are compensated absences?

Accepted Answer

A)  paid time off 
B)  unpaid time off 
C)  payroll deductions 
D)  healthcare benefits 
A)  paid time off 
B)  unpaid time off 
C)  payroll deductions 
D)  healthcare benefits

Question 7

During 2017, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 1% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: 
$\begin{array}{lcc}
& \underline{\text {Sales}}& \underline{\text {
Actual Warranty Expenditures}}\
2017 & \$ 100,000 & 8,000 \
2018 & 1,100,000 & 30,000 \
2019 &\underline{ 2,000,000} &\underline{ 100,000} \
&\$3,200,000&\$138,000
\end{array}$

What amount should Blevert report as a liability at December 31, 2017?

Accepted Answer

A)  $8,000 
B)  $9,000 
C)  $17,000 
D)  $1,000 
A)  $8,000 
B)  $9,000 
C)  $17,000 
D)  $1,000

Question 8

During 2017, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows:
$\begin{array}{lcc}
& \underline{\text {Sales}}& \underline{\text {
Actual Warranty Expenditures}}\
2017 & \$ 400,000 & 7,000 \
2018 & 1,800,000 & 23,000 \
2019 &\underline{ 2,000,000} &\underline{ 100,000} \
&\$4,200,000&\$130,000
\end{array}$

What amount should Blevert report as warranty expense for 2017?

Accepted Answer

A)  $7,000 
B)  $44,000 
C)  $51,000 
D)  $37,000 
A)  $7,000 
B)  $44,000 
C)  $51,000 
D)  $37,000

Question 9

On June 1, 2018, Superior Insurance Company collected $490,000 for a 2-year insurance policy beginning on the same date. The company has a December 31 year end. What is the balance of the unearned revenue account after adjusting entries on December 31, 2019? (Do not round any intermediary calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  $347,083 
B)  $142,917 
C)  $245,000 
D)  $102,083 
A)  $347,083 
B)  $142,917 
C)  $245,000 
D)  $102,083

Question 10

On June 1, 2018, Superior Insurance Company collected $490,000 for a 2-year insurance policy beginning on the same date. The company has a December 31 year end. What is the balance of the unearned revenue account after adjusting entries on December 31, 2018? (Do not round any intermediary calculations. Round your final answer to the nearest dollar.)

Accepted Answer

A)  $347,083 
B)  $142,917 
C)  $245,000 
D)  $102,083 
A)  $347,083 
B)  $142,917 
C)  $245,000 
D)  $102,083

Question 11

Asset retirement obligations must be legal obligations under both U.S. GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 12

All liabilities are probable future economic sacrifices arising from present obligations.

Accepted Answer

A) True 
 B)False

Question 13

The amount of revenue recognized from the sale of gift cards during the period is equal to gift card redemptions during the period minus estimated breakage.

Accepted Answer

A) True 
 B)False

Question 14

Mingle, Inc., a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2018. Because of a recently proven health hazard in one of its cleaning products, the U.S. government has clearly indicated its intention of having Mingle recall all bottles of that product sold in the last six months. The management of Mingle estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation?

Accepted Answer

A)  expense and equity restriction of $800,000 
B)  expense and contingent liability of $800,000 
C)  note disclosure only 
D)  no recognition 
A)  expense and equity restriction of $800,000 
B)  expense and contingent liability of $800,000 
C)  note disclosure only 
D)  no recognition

Question 15

Asset retirement obligations (AROs) are short-term legal obligations to dismantle and scrap assets.

Accepted Answer

A) True 
 B)False

Question 16

A service-type warranty exists if the customer has the option to purchase the warranty separately.

Accepted Answer

A) True 
 B)False

Question 17

If the warranty is required by law, it is more likely to be an assurance-type warranty.

Accepted Answer

A) True 
 B)False

Question 18

Kool's Stores made cash sales during the month of May of $79,000. The sales are subject to a 7% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the May sales transactions?

Accepted Answer

A)  debit Cash for $79,000 
B)  credit Sales Tax Payable for $73,470 
C)  credit Sales for $73,470 
D)  credit Sales Tax Payable for $5,530 
A)  debit Cash for $79,000 
B)  credit Sales Tax Payable for $73,470 
C)  credit Sales for $73,470 
D)  credit Sales Tax Payable for $5,530

Question 19

Under IFRS, asset retirement obligations are considered loss contingencies.

Accepted Answer

A) True 
 B)False

Question 20

During 2017, Blevert Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: 
$\begin{array}{lcc}
& \underline{\text {Sales}}& \underline{\text {
Actual Warranty Expenditures}}\
2017 & \$ 200,000 & 7,000 \
2018 & 1,400,000 & 29,000 \
2019 &\underline{ 2,400,000} &\underline{ 100,000} \
&\$4,000,000&\$136,000
\end{array}$

What amount should Blevert report as a liability at December 31, 2019?

Accepted Answer

A)  $288,000 
B)  $139,000 
C)  $156,000 
D)  $344,000 
A)  $288,000 
B)  $139,000 
C)  $156,000 
D)  $344,000

Operating liabilities are short-term obligations.

By recording a contingent gain, a company recognizes revenue when it is realized.

Because the sale of a service-type warranty increases sales revenue, the seller should recognize the expense of providing that warranty in the year of sale.

The sales tax liability account is debited when the seller collects sales taxes from customers.

If a company is able to estimate the rate of redemption for gift cards, they should use the ________ method to account for breakage.

What are compensated absences?

Asset retirement obligations must be legal obligations under both U.S. GAAP and IFRS.

All liabilities are probable future economic sacrifices arising from present obligations.

The amount of revenue recognized from the sale of gift cards during the period is equal to gift card redemptions during the period minus estimated breakage.

Asset retirement obligations (AROs) are short-term legal obligations to dismantle and scrap assets.

A service-type warranty exists if the customer has the option to purchase the warranty separately.

If the warranty is required by law, it is more likely to be an assurance-type warranty.

Kool's Stores made cash sales during the month of May of $79,000. The sales are subject to a 7% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the May sales transactions?

Under IFRS, asset retirement obligations are considered loss contingencies.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters

Exam 13: Operating Liabilities and Contingencies

Operating liabilities are short-term obligations.

By recording a contingent gain, a company recognizes revenue when it is realized.

Because the sale of a service-type warranty increases sales revenue, the seller should recognize the expense of providing that warranty in the year of sale.

The sales tax liability account is debited when the seller collects sales taxes from customers.

If a company is able to estimate the rate of redemption for gift cards, they should use the ________ method to account for breakage.

What are compensated absences?

Asset retirement obligations must be legal obligations under both U.S. GAAP and IFRS.

All liabilities are probable future economic sacrifices arising from present obligations.

The amount of revenue recognized from the sale of gift cards during the period is equal to gift card redemptions during the period minus estimated breakage.

Asset retirement obligations (AROs) are short-term legal obligations to dismantle and scrap assets.

A service-type warranty exists if the customer has the option to purchase the warranty separately.

If the warranty is required by law, it is more likely to be an assurance-type warranty.

Kool's Stores made cash sales during the month of May of $79,000. The sales are subject to a 7% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the May sales transactions?

Under IFRS, asset retirement obligations are considered loss contingencies.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

Extenssion: Ol Revenue Recognition Previous Standard

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, Cost Allocation

Long-Term Operating Assets: Departures From Historical Cost

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Income Taxes

Accounting for Leases

Extension: Ol Accounting for Leases Current Standard

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

The Statement of Cash Flows

Filters