Exam 8: Current and Contingent Liabilities

Gospel Ministries purchased on account two pianos on April 3, 2012 for $6,600. The company agreed to pay an extra $100 to have the seller deliver the pianos. Unfortunately, one of the pianos was damaged during transit. The seller agreed to deduct $200 from the amount owed. Gospel Ministries paid for the pianos in full on May 3, 2012. Prepare the journal entries that Gospel Ministries should make on April 3 and May 3.

Describe how you expect your new product offerings to strengthen further your ability to repay the loan and contribute to your bottom line.

A landlord records the collection of a tenant's security deposit as a(n)

A company has long-term assets of $2,000, current liabilities of $1,250, and long-term liabilities of $1,500. If the current ratio is 2.5, then current assets must be

Current liabilities should include any amounts that have been accrued as expenses but not yet paid.

A company has current assets of $4,400, current liabilities of $2,750, and long-term liabilities of $5,500. If the operating cash flow ratio is 1.5, then cash flows from operating activities must be

Gottlieb Pool n' Pub, Inc. sold $25,000 in gift cards during December 2013. The expiration date on these gift cards is December 31, 2014. During 2014, $23,940 of the gift cards were redeemed by customers.

A(n)____________________ usually guarantees the repair or replacement of defective goods during a period ranging from a few days to several years following the sale.

Liquidity relates to a company's ability to sell its assets for amounts that exceed the assets' book values.

Assume that a company has an operating cash flow ratio of 0.75. Payment of accrued wages payable would cause the operating cash flow ratio to

The operating cash flow ratio is computed by dividing cash flows from operating activities by ____________.

List several employee withholdings that impact an employee's net pay. Describe the types of payroll taxes that an employer might be required to pay.

When a company records the gross wages paid to its employees, the accounts to be credited include various taxes payable and ____________________.

Match the following terms with the appropriate definition. a.Accrued liabilities f.Payroll taxes b.Contingent liabilities g.Sales taxes c.Current liabilities h.Warranty d.Interest rate i.Withholdings e.Liabilities -Obligations whose amounts, timing, or recipient depend on future events

An adjusting entry to record accrued interest on a note payable includes a debit to Interest Expense and a credit to ____________________.

Federal excise taxes payable is not a current liability.

Why is the liability for warranties recognized during the period when products are sold rather than the period when warranty claims are satisfied?

Match the following terms with the appropriate definition. a.Accrued liabilities f.Payroll taxes b.Contingent liabilities g.Sales taxes c.Current liabilities h.Warranty d.Interest rate i.Withholdings e.Liabilities -Taxes and other amounts deducted from gross pay

German Auto Parts is a defendant in a multi-million dollar lawsuit that was filed in a prior year. The lawsuit was not previously disclosed in the financial statements or accompanying footnotes, as the company has vigorously defended its position and its attorneys initially indicated that the claim was not valid. During the current year, however, the facts and circumstances have changed such that the likelihood of a loss approximating $5 million is now considered reasonably possible. How should the company recognize this lawsuit in its current year financial statements?

A company provides a one-year warranty for its products. The estimated cost of parts and labor required to satisfy warranty claims should be recorded as a current liability in the period the products are sold.