Question 1

West Coast Outdoor Co.sold $22,000 worth of trampolines with a one year warranty.The company estimates that 2% of the sales will result in warranty work.West Coast Outdoor Co.should:

Accepted Answer

A)  Recognize warranty expense at the time of sale. 
B)  Recognize warranty expense at the time warranty work is performed. 
C)  Recognize warranty liability at the time of sale. 
D)  Recognize warranty expense and warranty liability at the time of sale. 
E)  Recognize warranty expense at the time warranty work is performed and warranty liability at the time of salE.

Question 2

On September 15,Lohr Co.borrowed $50,000 from Close Bank.The loan had an interest rate of 12% and was due in 60 days.
Prepare the journal entry for Lohr Co.to record the note.

Accepted Answer

The answer of On September 15,Lohr Co.borrowed $50,000 from Close...

Question 3

Unearned revenues are:

Accepted Answer

A)  Amounts received in advance from customers for future delivery of products or services. 
B)  Not recorded as liabilities. 
C)  The same as accrued revenues. 
D)  Reduce assets. 
E)  All of these answers are correct.

Question 4

Long-term liabilities are obligations of a company requiring payment within one year.

Accepted Answer

A) True 
 B)False

Question 5

On December 31,2015,Peligrino Co.has a long term note payable of $800,000.Of that balance,$100,000 will be paid within one year from the balance sheet date.How much of the note payable should Peligrino Co.report as a long term liability when they prepare the December 31,2015 balance sheet?

Accepted Answer

A)  $700,000. 
B)  $800,000. 
C)  $900,000. 
D)  $1,000,000. 
E)  Nothing.Disclose in a note to the financial statements.

Question 6

Gross pay is the same as net pay.

Accepted Answer

A) True 
 B)False

Question 7

On November 16,2015,Source for Sports gave Kinsmen Sports a 90-day,12%,$60,000 note payable to extend a past due account payable.
Prepare the journal entry for Source for Sports to record the note and the extension of the past due account.

Accepted Answer

The answer of On November 16,2015,Source for Sports gave Kinsmen...

Question 8

On November 16,Predator Company borrowed $112,000 from DT Bank.The loan had an interest rate of 10% and was due in 90 days.Predator Company's fiscal year-end is December 31.
Prepare the journal entry to record the interest due at December 31.

Accepted Answer

The answer of On November 16,Predator Company borrowed $112,000 from...

Question 9

West Coast Outdoor Co.estimates that warranty expense will be 1% of sales.The current period's sales were $740,000.The entry to record the warranty expense is:

Accepted Answer

A) 
 
B) 
 
C) 
 
D) 
 
E)

Question 10

The matching principle requires that the total interest expense be allocated over the term of the note.

Accepted Answer

A) True 
 B)False

Question 11

Classify each of the following items as either:
1.Known current liability.
2.Estimated liability.
3.Contingent liability.
Pending lawsuit
Warranty liability on $150,000 worth of products sold
Accounts payable
Income taxes payable
CPP payable
Interest payable
Environmental liability
Property taxes payable
Payroll taxes payable
Unearned revenues

Accepted Answer

The answer of Classify each of the following items as...

Question 12

Estimated liabilities are also referred to as provisions.

Accepted Answer

A) True 
 B)False

Question 13

An estimated liability:

Accepted Answer

A)  Is an unknown liability of a certain amount. 
B)  Can be the result of a lawsuit. 
C)  Is a liability that may occur if a future event occurs. 
D)  Is a known obligation of an uncertain amount. 
E)  None of these answers is correct.

Question 14

Management can withhold any information regarding future events if releasing the information could cause a share price decline.

Accepted Answer

A) True 
 B)False

Question 15

The relevance principle requires that contingent assets be recorded.

Accepted Answer

A) True 
 B)False

Question 16

Amounts received in advance from a customer for future products or services are initially recorded as liabilities.

Accepted Answer

A) True 
 B)False

Question 17

Accounts payable:

Accepted Answer

A)  Have specific due dates. 
B)  Are long-term liabilities. 
C)  Are estimated liabilities. 
D)  Are amounts owed to suppliers for products and services purchased on credit. 
E)  All of these answers are correct.

Question 18

All expected future payments are liabilities.

Accepted Answer

A) True 
 B)False

Question 19

A note payable can be used to extend the credit period for an account payable.

Accepted Answer

A) True 
 B)False

Question 20

Employee vacation benefits:

Accepted Answer

A)  Are estimated liabilities. 
B)  Are contingent liabilities. 
C)  Become an expense when the employee takes a vacation. 
D)  Are not recorded until the employee leaves. 
E)  Are not required by law.

Exam 11: Current Liabilities

West Coast Outdoor Co.sold $22,000 worth of trampolines with a one year warranty.The company estimates that 2% of the sales will result in warranty work.West Coast Outdoor Co.should:

On September 15,Lohr Co.borrowed $50,000 from Close Bank.The loan had an interest rate of 12% and was due in 60 days. Prepare the journal entry for Lohr Co.to record the note.

Unearned revenues are:

Long-term liabilities are obligations of a company requiring payment within one year.

On December 31,2015,Peligrino Co.has a long term note payable of $800,000.Of that balance,$100,000 will be paid within one year from the balance sheet date.How much of the note payable should Peligrino Co.report as a long term liability when they prepare the December 31,2015 balance sheet?

Gross pay is the same as net pay.

On November 16,2015,Source for Sports gave Kinsmen Sports a 90-day,12%,$60,000 note payable to extend a past due account payable. Prepare the journal entry for Source for Sports to record the note and the extension of the past due account.

On November 16,Predator Company borrowed $112,000 from DT Bank.The loan had an interest rate of 10% and was due in 90 days.Predator Company's fiscal year-end is December 31. Prepare the journal entry to record the interest due at December 31.

West Coast Outdoor Co.estimates that warranty expense will be 1% of sales.The current period's sales were $740,000.The entry to record the warranty expense is:

The matching principle requires that the total interest expense be allocated over the term of the note.

Estimated liabilities are also referred to as provisions.

An estimated liability:

Management can withhold any information regarding future events if releasing the information could cause a share price decline.

The relevance principle requires that contingent assets be recorded.

Amounts received in advance from a customer for future products or services are initially recorded as liabilities.

Accounts payable:

All expected future payments are liabilities.

A note payable can be used to extend the credit period for an account payable.

Employee vacation benefits: