Question 1

When a liability is initially recorded, it is recorded at the future amount of all payments.

Accepted Answer

A) True 
 B)False

Question 2

Long-term liabilities are reported on the balance sheet at an amount equal to the future cash flows.

Accepted Answer

A) True 
 B)False

Question 3

Moore Company has the following partial list of account balances at year-end December 31, 2016:   Additional information: The accounts payable balance at the end of the prior year was $3,000.
Required:
(All answers are for December 31, 2016.) 
A.Determine the following items:
1.Current assets
2.Current liabilities
3.Working capital
4.Accounts payable turnover ratio
5.Average age of accounts payable
B.Assume that cash is used at December 31, 2016, to pay the entire balance of accounts payable.Determine the revised amounts from part (A) above for the following items:
1.Current assets
2.Current liabilities
3.Working capital
4.Accounts payable turnover ratio
5.Average age of accounts payable
C.Comment on the effect of paying accounts payable at year-end with regard to working capital and accounts payable management.

Accepted Answer

A. 1. Current assets = $31,900 = Cash $2

Question 4

Which of the following describes an accrued liability?

Accepted Answer

A) It is an expense that has been both incurred and paid. 
B) It is an expense that has been incurred but not yet paid. 
C) It is an expense that has been prepaid but not yet consumed. 
D) It is a liability where the cash flow has taken place but the revenue has yet to be earneD.An accrued liability is recorded when an expense is incurred but not yet paid. 
A) It is an expense that has been both incurred and paid. 
B) It is an expense that has been incurred but not yet paid. 
C) It is an expense that has been prepaid but not yet consumed. 
D) It is a liability where the cash flow has taken place but the revenue has yet to be earneD.An accrued liability is recorded when an expense is incurred but not yet paid.

Question 5

SRJ Corporation entered into the following transactions: • The accrual of interest expense on a six-month note payable.
• Collected cash for services to be provided within the next six months.
• The reclassification of short-term debt to long-term debt.
Which of the transactions for SRJ Corporation resulted in a decrease in working capital?

Accepted Answer

A) The accrual of interest expense. 
B) Collecting cash for services to be provided in the future. 
C) The reclassification of short-term debt to long-term debt. 
D) Both the accrual of interest expense and the reclassification of short-term debt to long-term debt. 
A) The accrual of interest expense. 
B) Collecting cash for services to be provided in the future. 
C) The reclassification of short-term debt to long-term debt. 
D) Both the accrual of interest expense and the reclassification of short-term debt to long-term debt.

Question 6

An employee has an obligation to pay his payroll taxes to the employer.

Accepted Answer

A) True 
 B)False

Question 7

A current liability is created when a customer pays cash for services to be provided in the future.

Accepted Answer

A) True 
 B)False

Question 8

A loan supported by an agreement to transfer ownership of assets if the loan is not repaid is called a:

Accepted Answer

A) Private placement of debt 
B) Publicly traded debt 
C) Secured debt 
D) Capital lease 
A) Private placement of debt 
B) Publicly traded debt 
C) Secured debt 
D) Capital lease

Question 9

Rudy Corporation is looking to purchase a building costing $500,000 by paying $100,000 cash on the purchase date, and agreeing to make annual payments for the next ten years. The first payment is due one year after the purchase date. Rudy's incremental borrowing rate is 10%. Each of the annual payments is closest to:

Accepted Answer

A) $65,098. 
B) $86,821. 
C) $55,098. 
D) $44,000. 
A) $65,098. 
B) $86,821. 
C) $55,098. 
D) $44,000.

Question 10

A company's income statement reported net income of $80,000 during 2016. The income tax return excluded a revenue item of $10,000 (reported on the income statement) because under the tax laws the $10,000 would not be reported for tax purposes until 2017.
Required:
Prepare the journal entry to record the 2016 income tax expense assuming a 40% tax rate.

Accepted Answer

The answer of A company's income statement reported net income...

Question 11

Smith Corporation entered into the following transactions: • Purchased inventory on account.
• Collected an account receivable.
• Purchased equipment using cash.
Which of the transactions for Smith Corporation resulted in an increase in working capital?

Accepted Answer

A) The inventory purchase on account. 
B) Collecting an account receivable. 
C) The purchase of equipment using cash. 
D) None of the transactions resulted in an increase in working capital. 
A) The inventory purchase on account. 
B) Collecting an account receivable. 
C) The purchase of equipment using cash. 
D) None of the transactions resulted in an increase in working capital.

Question 12

Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years. The first payment is due six months after the purchase date. Libby's incremental borrowing rate is 8%. The liability reported on the balance sheet as of the purchase date, after the initial $5,000 payment was made, is closest to:

Accepted Answer

A) $45,000. 
B) $33,664. 
C) $38,664. 
D) $40,000. 
A) $45,000. 
B) $33,664. 
C) $38,664. 
D) $40,000.

Question 13

Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017. What is the amount to be paid to the bank on March 31, 2017 for interest and principal?

Accepted Answer

A) $50,000. 
B) $51,500. 
C) $54,000. 
D) $56,000. 
A) $50,000. 
B) $51,500. 
C) $54,000. 
D) $56,000.

Question 14

For the present value of a single amount, the compounding period may only be once a year.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is correct?

Accepted Answer

A) Social Security tax is paid only by the employer. 
B) The pay period always ends in conjunction with the company's fiscal year-end. 
C) Employee benefits such as vacation time and sick days should be recognized when the employees earn the benefit and not when they take the days off from work. 
D) Unemployment taxes are paid by the employee only. 
A) Social Security tax is paid only by the employer. 
B) The pay period always ends in conjunction with the company's fiscal year-end. 
C) Employee benefits such as vacation time and sick days should be recognized when the employees earn the benefit and not when they take the days off from work. 
D) Unemployment taxes are paid by the employee only.

Question 16

With regard to reporting contingent liabilities on a balance sheet, financial statements prepared under International Financial Reporting Standards (IFRS) will:

Accepted Answer

A) Have fewer contingent liabilities accrued than under U.S.GAAP because the IFRS guideline for "probable" is a higher percentage than the U.S.GAAP guideline for "probable". 
B) Have more contingent liabilities accrued than under U.S.GAAP because the IFRS guideline for "probable" is a lower percentage than the U.S.GAAP guideline for "probable". 
C) Have more contingent liabilities accrued than under U.S.GAAP because IFRS requires all lawsuits, environmental problems, and product warranties that are reasonably estimable to be accrued while U.S.GAAP requires accrual only if losses are reasonably possible of being incurred. 
D) Have fewer contingent liabilities accrued than under U.S.GAAP because IFRS requires a more subjective evaluation of the probability of occurrence than does U.S.GAAP. 
A) Have fewer contingent liabilities accrued than under U.S.GAAP because the IFRS guideline for "probable" is a higher percentage than the U.S.GAAP guideline for "probable". 
B) Have more contingent liabilities accrued than under U.S.GAAP because the IFRS guideline for "probable" is a lower percentage than the U.S.GAAP guideline for "probable". 
C) Have more contingent liabilities accrued than under U.S.GAAP because IFRS requires all lawsuits, environmental problems, and product warranties that are reasonably estimable to be accrued while U.S.GAAP requires accrual only if losses are reasonably possible of being incurred. 
D) Have fewer contingent liabilities accrued than under U.S.GAAP because IFRS requires a more subjective evaluation of the probability of occurrence than does U.S.GAAP.

Question 17

Rae Company purchased a new vehicle by paying $10,000 cash on the purchase date and agreeing to pay $3,000 every three months during the next five years. The first payment is due three months after the purchase date. Rae's incremental borrowing rate is 12%. The vehicle reported on the balance sheet as of the purchase date is closest to:

Accepted Answer

A) $44,633. 
B) $50,000. 
C) $54,633. 
D) $60,000. 
A) $44,633. 
B) $50,000. 
C) $54,633. 
D) $60,000.

Question 18

Smith Corporation entered into the following transactions: • Purchased inventory on account.
• Collected an account receivable.
• Purchased equipment using cash.
Which of the following statements about Smith's transactions is correct?

Accepted Answer

A) The inventory purchase on account increased working capital. 
B) Collecting an account receivable increases working capital. 
C) The equipment purchase decreases working capital. 
D) The inventory purchase on account decreases working capital. 
A) The inventory purchase on account increased working capital. 
B) Collecting an account receivable increases working capital. 
C) The equipment purchase decreases working capital. 
D) The inventory purchase on account decreases working capital.

Question 19

Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2017. In 2016, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2017 is closest to:

Accepted Answer

A) 4.25 
B) 4.13 
C) 3.45 
D) 3.31 
A) 4.25 
B) 4.13 
C) 3.45 
D) 3.31

Question 20

When a company has debt coming due and wants to refinance and classify the debt as a long-term liability rather than paying for it currently with cash:

Accepted Answer

A) U.S.GAAP requires the debt be refinanced by the balance sheet date and IFRS requires that the company have intent to refinance on a long-term basis. 
B) U.S.GAAP requires that the company have intent to refinance the debt on a long-term basis and IFRS requires the debt be refinanced by the balance sheet date. 
C) U.S.GAAP requires that the company have intent and ability to refinance the debt on a long-term basis and IFRS requires the debt be refinanced by the balance sheet date. 
D) U.S.GAAP requires the debt be refinanced within 60 days of the balance sheet date and IFRS requires the debt be refinanced by within 30 days of the balance sheet date. 
A) U.S.GAAP requires the debt be refinanced by the balance sheet date and IFRS requires that the company have intent to refinance on a long-term basis. 
B) U.S.GAAP requires that the company have intent to refinance the debt on a long-term basis and IFRS requires the debt be refinanced by the balance sheet date. 
C) U.S.GAAP requires that the company have intent and ability to refinance the debt on a long-term basis and IFRS requires the debt be refinanced by the balance sheet date. 
D) U.S.GAAP requires the debt be refinanced within 60 days of the balance sheet date and IFRS requires the debt be refinanced by within 30 days of the balance sheet date.

When a liability is initially recorded, it is recorded at the future amount of all payments.

Long-term liabilities are reported on the balance sheet at an amount equal to the future cash flows.

Which of the following describes an accrued liability?

An employee has an obligation to pay his payroll taxes to the employer.

A current liability is created when a customer pays cash for services to be provided in the future.

A loan supported by an agreement to transfer ownership of assets if the loan is not repaid is called a:

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. Which of the transactions for Smith Corporation resulted in an increase in working capital?

Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017. What is the amount to be paid to the bank on March 31, 2017 for interest and principal?

For the present value of a single amount, the compounding period may only be once a year.

Which of the following statements is correct?

With regard to reporting contingent liabilities on a balance sheet, financial statements prepared under International Financial Reporting Standards (IFRS) will:

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. Which of the following statements about Smith's transactions is correct?

Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2017. In 2016, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2017 is closest to:

When a company has debt coming due and wants to refinance and classify the debt as a long-term liability rather than paying for it currently with cash:

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

PPA: Reporting and Interpreting Investments in Other Corporations

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Exam 9: Reporting and Interpreting Liabilities

When a liability is initially recorded, it is recorded at the future amount of all payments.

Long-term liabilities are reported on the balance sheet at an amount equal to the future cash flows.

Which of the following describes an accrued liability?

An employee has an obligation to pay his payroll taxes to the employer.

A current liability is created when a customer pays cash for services to be provided in the future.

A loan supported by an agreement to transfer ownership of assets if the loan is not repaid is called a:

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. Which of the transactions for Smith Corporation resulted in an increase in working capital?

Mission Corp. borrowed $50,000 cash on April 1, 2016, and signed a one-year 12%, interest-bearing note payable. The interest and principal are both due on March 31, 2017. What is the amount to be paid to the bank on March 31, 2017 for interest and principal?

For the present value of a single amount, the compounding period may only be once a year.

Which of the following statements is correct?

With regard to reporting contingent liabilities on a balance sheet, financial statements prepared under International Financial Reporting Standards (IFRS) will:

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. Which of the following statements about Smith's transactions is correct?

Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $84 million for 2017. In 2016, cost of goods sold was $258 million and accounts payable was $72 million. Landseeker's accounts payable turnover ratio in 2017 is closest to:

When a company has debt coming due and wants to refinance and classify the debt as a long-term liability rather than paying for it currently with cash:

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

Analyzing Financial Statements

PPA: Reporting and Interpreting Investments in Other Corporations

Filters