Question 1

Warranty liabilities are estimated based on actual warranty costs incurred to date.

Accepted Answer

A) True 
 B)False  False

Question 2

A future commitment is NOT considered a liability unless a present obligation also exists.

Accepted Answer

A) True 
 B)False  True

Question 3

During April 2014, DMZ Company incurred the following transactions. This is DMZ's first period of operations, and they plan to use the periodic method of accounting for inventory.  
 In addition to liabilities arising from the above transactions, DMZ's Accounts Payable balance at April 30, 2014 is $65,000.
Instructions 
a. Record the above transactions.
b. Prepare the current liabilities portion of DMZ's balance sheet at April 30, 2014.

Accepted Answer

a.
   b.

Question 4

A current liability is a debt that can reasonably be expected to be paid

Accepted Answer

A)  within one year. 
B)  between 6 months and 18 months. 
C)  out of currently recognized revenues. 
D)  out of cash currently on hand. 
A)  within one year. 
B)  between 6 months and 18 months. 
C)  out of currently recognized revenues. 
D)  out of cash currently on hand.

Question 5

The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is:

Accepted Answer

A)  Notes Payable Interest Payable
Cash 
B)  Notes Payable Interest Expense
Cash 
C)  Notes Payable Cash 
D)  Notes Payable Cash
Interest Payable 
A)  Notes Payable Interest Payable
Cash 
B)  Notes Payable Interest Expense
Cash 
C)  Notes Payable Cash 
D)  Notes Payable Cash
Interest Payable

Question 6

A note payable must always have an interest rate attached to it.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is NOT considered an estimated liability?

Accepted Answer

A)  accrued wages 
B)  gift card promotions 
C)  warranties 
D)  customer loyalty programs 
A)  accrued wages 
B)  gift card promotions 
C)  warranties 
D)  customer loyalty programs

Question 8

Kent Company's December 31, 2014 trial balance includes the following accounts:   Other information:
The mortgage payable is due in annual principal installments of $4,000 per year.
The note payable is due in full in 18 months' time.
Industry average working capital ratio is 2.5:1
Instructions 
a. Prepare the current liabilities section of Kent's December 31, 2014 balance sheet.
b. Calculate and comment on Kent's working capital and current ratio.

Accepted Answer

a.
 @#IMG-DLM& b.
 @#IMG-DLM& Current ratio ($83,200 ÷ $45,3

Question 9

With a customer loyalty program, the cost of the program is usually shown as a sales discount and reported as a contra sales account.

Accepted Answer

A) True 
 B)False

Question 10

Prime rate refers to the rate that banks charge their worst customers.

Accepted Answer

A) True 
 B)False

Question 11

Current maturities of long-term debt refer to the amount of interest on a note payable that must be paid in the current year.

Accepted Answer

A) True 
 B)False

Question 12

The Redemption Reward Liability account is reported as a

Accepted Answer

A)  current asset. 
B)  contra sales account. 
C)  current liability. 
D)  non-current liability. 
A)  current asset. 
B)  contra sales account. 
C)  current liability. 
D)  non-current liability.

Question 13

Under IFRS, a provision is a liability of certain timing and amounts.

Accepted Answer

A) True 
 B)False

Question 14

Loyalty programs are designed to

Accepted Answer

A)  decrease sales. 
B)  increase inventory levels. 
C)  increase sales. 
D)  decrease cost of goods sold. 
A)  decrease sales. 
B)  increase inventory levels. 
C)  increase sales. 
D)  decrease cost of goods sold.

Question 15

If it is likely that a company will lose a lawsuit and the amount can be reliably estimated then the company must

Accepted Answer

A)  record the asset. 
B)  disclose only in the notes to the financial statements. 
C)  not record or disclose any information. 
D)  record the loss and the liability. 
A)  record the asset. 
B)  disclose only in the notes to the financial statements. 
C)  not record or disclose any information. 
D)  record the loss and the liability.

Question 16

Under ASPE, Current Liabilities are usually listed

Accepted Answer

A)  after long-term debt on the balance sheet. 
B)  in order of liquidity on the balance sheet. 
C)  in order of maturity on the balance sheet. 
D)  in increasing order of magnitude on the balance sheet. 
A)  after long-term debt on the balance sheet. 
B)  in order of liquidity on the balance sheet. 
C)  in order of maturity on the balance sheet. 
D)  in increasing order of magnitude on the balance sheet.

Question 17

Determinable liabilities involve no uncertainty about all of the following EXCEPT

Accepted Answer

A)  the existence of the liability. 
B)  the amount of the liability. 
C)  the eventual payment of the liability. 
D)  all of the above involve no uncertainty with respect to the determinable liability. 
A)  the existence of the liability. 
B)  the amount of the liability. 
C)  the eventual payment of the liability. 
D)  all of the above involve no uncertainty with respect to the determinable liability.

Question 18

Hardin Manufacturing began operations in January 2014. Hardin manufactures and sells two different computer monitors.
Monitor A, is a flat panel hi-definition monitor, which carries a two-year manufacturer's warranty against defects in workmanship. Hardin's management project that 8% of the monitors will require repair during the first year of the warranty while approximately 6% will require repair during the second year of the warranty. Monitor A sells for $400. The average cost to repair a monitor is $80.

Monitor B is a regular LED monitor that retails for $150. Hardin has entered into an agreement with a local electronics firm who charges Hardin $20 per monitor sold and then covers all warranty costs related to this monitor.
Sales and warranty information for 2014 is as follows:
Sold 2,000 monitors (800 monitor A and 1,200 monitor B); all sales were on account.
Actual warranty expenditures for monitor A were $4,000.
Instructions
a. Prepare journal entries that summarize the sales and any aspects of the warranty for 2014.
b. Determine the balance in the Warranty Liability account at the end of 2014.

Accepted Answer

The answer of Hardin Manufacturing began operations in January 2014....

Question 19

ASPE considers a liability to be a contingent liability as long as its ultimate existence depends on the outcome of a future event, even if the event is likely to occur.

Accepted Answer

A) True 
 B)False

Question 20

Kim Company sells 2,000 units of its product for $500 each in 2014. The selling price includes a one-year warranty on parts. It is expected that 3% of the units will be defective and that repair costs will average $100 per unit. In 2014, warranty contracts are honoured on 40 units for a total cost of $4,000.
-What amount should Kim Company accrue on December 31, 2014 for estimated warranty expense?

Accepted Answer

A)  $6,000 
B)  $4,000 
C)  $2,000 
D)  $30,000 
A)  $6,000 
B)  $4,000 
C)  $2,000 
D)  $30,000

Warranty liabilities are estimated based on actual warranty costs incurred to date.

A future commitment is NOT considered a liability unless a present obligation also exists.

A current liability is a debt that can reasonably be expected to be paid

The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is:

A note payable must always have an interest rate attached to it.

Which of the following is NOT considered an estimated liability?

With a customer loyalty program, the cost of the program is usually shown as a sales discount and reported as a contra sales account.

Prime rate refers to the rate that banks charge their worst customers.

Current maturities of long-term debt refer to the amount of interest on a note payable that must be paid in the current year.

The Redemption Reward Liability account is reported as a

Under IFRS, a provision is a liability of certain timing and amounts.

Loyalty programs are designed to

If it is likely that a company will lose a lawsuit and the amount can be reliably estimated then the company must

Under ASPE, Current Liabilities are usually listed

Determinable liabilities involve no uncertainty about all of the following EXCEPT

ASPE considers a liability to be a contingent liability as long as its ultimate existence depends on the outcome of a future event, even if the event is likely to occur.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters

Exam 10: Current Liabilities

Warranty liabilities are estimated based on actual warranty costs incurred to date.

A future commitment is NOT considered a liability unless a present obligation also exists.

A current liability is a debt that can reasonably be expected to be paid

The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is:

A note payable must always have an interest rate attached to it.

Which of the following is NOT considered an estimated liability?

With a customer loyalty program, the cost of the program is usually shown as a sales discount and reported as a contra sales account.

Prime rate refers to the rate that banks charge their worst customers.

Current maturities of long-term debt refer to the amount of interest on a note payable that must be paid in the current year.

The Redemption Reward Liability account is reported as a

Under IFRS, a provision is a liability of certain timing and amounts.

Loyalty programs are designed to

If it is likely that a company will lose a lawsuit and the amount can be reliably estimated then the company must

Under ASPE, Current Liabilities are usually listed

Determinable liabilities involve no uncertainty about all of the following EXCEPT

ASPE considers a liability to be a contingent liability as long as its ultimate existence depends on the outcome of a future event, even if the event is likely to occur.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Financial Statement Analysis

Investments

Filters