Question 1

Which of the following statements is true?

Accepted Answer

A) GAAP requires that unconditional non-cancellable purchase obligations be accrued and reported as liabilities on the balance sheet. 
B) Unearned revenues collected in advance should be classified as deferred credits on the balance sheet. 
C) GAAP requires that footnote disclosures of future payments resulting from off-balance-sheet financing transactions be disclosed separately for only the next five years. 
D) If a company sells goods and agrees to repurchase them at a specified price, both a sale and a current liability should be recorded if the requirements of GAAP are to be met. 
A) GAAP requires that unconditional non-cancellable purchase obligations be accrued and reported as liabilities on the balance sheet. 
B) Unearned revenues collected in advance should be classified as deferred credits on the balance sheet. 
C) GAAP requires that footnote disclosures of future payments resulting from off-balance-sheet financing transactions be disclosed separately for only the next five years. 
D) If a company sells goods and agrees to repurchase them at a specified price, both a sale and a current liability should be recorded if the requirements of GAAP are to be met.

Question 2

Unearned or deferred revenue can occur when

Accepted Answer

A) services are provided prior to receipt of cash 
B) goods are sold on account 
C) services are provided after the receipt of cash 
D) goods are sold for cash 
A) services are provided prior to receipt of cash 
B) goods are sold on account 
C) services are provided after the receipt of cash 
D) goods are sold for cash

Question 3

IFRS accounting for contingencies differs from U.S.GAAP in several details.Briefly describe three of those differences.

Accepted Answer

Four diffe

Question 4

Match between columns
                        Premises: Refundable deposits received from customers.
Dividends in arrears on its cumulative preferred stock.
Unearned interest included in the face amount of a note receivable.
Estimated property taxes prior to receiving the tax bill.
Future warranty costs, but the company uses the modified cash basis.
A declared property dividend.
Sick pay benefits that accumulate, but do not vest.
Current portion of a long-term lease obligation that comes due next year.
Current portion of a serial bond payable being paid from a sinking fund.
Short-term debt that is being refinanced on a long-term basis.
Derivative financial instruments that represent fair-value obligations

Accepted Answer

The Answer of Yes and No and Optional is...

Question 5

Bonita places a coupon in each box of its product.Customers may send in five coupons and $3, and the company will send them a recipe book.Sufficient books were purchased at a cost of $5 each.A total of 400, 000 boxes of product were sold in 2010.It was estimated that 6% of the coupons would be redeemed.During 2010, 8, 000 coupons were redeemed.Which entry should be made at December 31, 2010?

Accepted Answer

A) 
Premium Expense $ \quad 6,400 $
Estimated Premium Claims Outstanding $ \quad 6,400 $ 
B) 
Premium Expense $\quad 16,000$
Estimated Premium Claims Outstanding $\quad 16,000$ 
C) 
$\begin{array} { l r } 
\text { Premium Expense } & 6,400 \
\text { Inventory of Premiums } && 6,400
\end{array}$ 
D) 
Premium Expense $\quad 9,600$
Estimated Premium Claims Outstanding $\quad 9,600$ 
A) 
Premium Expense $ \quad 6,400 $
Estimated Premium Claims Outstanding $ \quad 6,400 $ 
B) 
Premium Expense $\quad 16,000$
Estimated Premium Claims Outstanding $\quad 16,000$ 
C) 
$\begin{array} { l r } 
\text { Premium Expense } & 6,400 \
\text { Inventory of Premiums } && 6,400
\end{array}$ 
D) 
Premium Expense $\quad 9,600$
Estimated Premium Claims Outstanding $\quad 9,600$

Question 6

Ingram, Inc., places a coupon in each box of its product.Customers may send in ten coupons and $3, and the company will send them a CD.Sufficient CDs were purchased at $5 apiece.A certain number of boxes of product were sold in 2010.It was estimated that a total of 5% of the coupons will be redeemed.In 2010, 18, 000 coupons were redeemed.Mailing costs were $0.40 per CD.At December 31, 2010, the following adjusting entry was made to record the estimated liability for premium outstanding:
   Required:
Compute the number of boxes of product sold by Ingram in 2010.

Accepted Answer

None

Question 7

Exhibit 13-4 During 2010, the Alexandra Company began selling a new type of machine that carries a two-year warranty against all defects.Based on past industry and company experience, estimated warranty costs should total $2, 000 per machine sold.During 2010, sales and actual warranty expenditures were $2, 000, 000 (40 machines)and $22, 000, respectively.
-
Refer to Exhibit 13-4.What amount should Alexandra report as its warranty expense for 2010?

Accepted Answer

A) $ 0 
B) $ 22, 000 
C) $ 80, 000 
D) $160, 000 
A) $ 0 
B) $ 22, 000 
C) $ 80, 000 
D) $160, 000

Question 8

List and describe the three conditions which must be present for an item to be classified as a liability.

Accepted Answer

The answer of List and describe the three conditions which...

Question 9

Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing current assets or the creation of other current liabilities within

Accepted Answer

A) one year or operating cycle, whichever is longer 
B) one year 
C) one year or operating cycle, whichever is shorter 
D) an operating cycle 
A) one year or operating cycle, whichever is longer 
B) one year 
C) one year or operating cycle, whichever is shorter 
D) an operating cycle

Question 10

Which of the following statements regarding the gross and net methods for trade accounts payable is not true?

Accepted Answer

A) The net method overstates accounts payable at the end of the accounting period. 
B) The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired. 
C) The gross method is more widely used in practice. 
D) The net method more accurately measures liquidity. 
A) The net method overstates accounts payable at the end of the accounting period. 
B) The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired. 
C) The gross method is more widely used in practice. 
D) The net method more accurately measures liquidity.

Question 11

Management of current liabilities arises, in part, because of a concern over

Accepted Answer

A) profitability 
B) liquidity 
C) relevance 
D) reliability 
A) profitability 
B) liquidity 
C) relevance 
D) reliability

Question 12

Exhibit 13-3 Paul Company includes three coupons in each package of crackers it sells.In exchange for 20 coupons, a customer will receive a cheese plate.Paul estimates that 30% of the coupons will be redeemed.In 2010, Paul sold 4, 000, 000 boxes of crackers and purchased 150, 000 cheese plates at $2.50 each.During the year, 970, 000 coupons were redeemed.
-
Refer to Exhibit 13-3.What amount should Paul record as premium expense for 2010?

Accepted Answer

A) $121, 250 
B) $450, 000 
C) $375, 000 
D) $500, 000 
A) $121, 250 
B) $450, 000 
C) $375, 000 
D) $500, 000

Question 13

The operating cycle is typically defined as the time it requires to convert

Accepted Answer

A) cash to inventory to receivables 
B) raw materials to finished goods 
C) finished goods to receivables to cash 
D) cash to inventory to receivables to cash 
A) cash to inventory to receivables 
B) raw materials to finished goods 
C) finished goods to receivables to cash 
D) cash to inventory to receivables to cash

Question 14

Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?

Accepted Answer

A) The net method overstates accounts payable at the end of the accounting period. 
B) The net method is more widely used in practice than is the gross method. 
C) The gross method more accurately measures liquidity. 
D) The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired. 
A) The net method overstates accounts payable at the end of the accounting period. 
B) The net method is more widely used in practice than is the gross method. 
C) The gross method more accurately measures liquidity. 
D) The net method highlights management inefficiency because purchase discounts lost are recorded whenever an invoice is paid after the cash discount period has expired.

Question 15

Which of the following statements is true?

Accepted Answer

A) A dividend payable in shares of the issuing company's stock is reported as a current liability. 
B) Interest and dividends accrue as a liability as time passes. 
C) Declaration of a dividend may not necessarily result in a current liability. 
D) Dividends on cumulative preferred stock, even though undeclared, are a liability. 
A) A dividend payable in shares of the issuing company's stock is reported as a current liability. 
B) Interest and dividends accrue as a liability as time passes. 
C) Declaration of a dividend may not necessarily result in a current liability. 
D) Dividends on cumulative preferred stock, even though undeclared, are a liability.

Question 16

Existing claims related to product warranties and litigation as of December 31, 2010, indicate that it is probable that a liability has been incurred.However, as of December 31, 2010, the exact amount of the obligation cannot be reasonably estimated, but a range of possible amounts has been determined.Based on these facts, an estimated loss contingency should be

Accepted Answer

A) accrued 
B) disclosed but not accrued 
C) neither accrued nor disclosed 
D) classified as an appropriation of retained earnings 
A) accrued 
B) disclosed but not accrued 
C) neither accrued nor disclosed 
D) classified as an appropriation of retained earnings

Question 17

Listed below are several types of contingencies for the Kauffman Company:
   Required:
Indicate whether the Kauffman Company should make an accrual, a footnote disclosure, or neither of these for each contingency.

Accepted Answer

The answer of Listed below are several types of contingencies...

Question 18

When selecting within a range of outcome estimates for probable contingencies, the requirements of IFRS and GAAP, respectively, are to accrue what amount in the range? $\begin{array}{lll}
&\text { IFRS }&\text { GAAP }\
\text { I. } & \text { minimum } & \text { minimum } \
\text { II. } & \text { midpoint } & \text { minimum } \
\text { III. } & \text { minimum } & \text { midpoint } \
\text { IV. } & \text { midpoint } & \text { midpoint }
\end{array}$

Accepted Answer

A) I 
B) II 
C) III 
D) IV 
A) I 
B) II 
C) III 
D) IV

Question 19

Claremore Company instituted a vacation and sick pay policy on January 1, 2010.Thirty employees, averaging $100 per day per employee, were covered under the plan.The policy allows each employee five days of sick pay and twelve days of vacation pay per year.The sick pay accumulates up to a ten-day maximum.Vacation pay accumulates without a maximum.The sick pay vests, but vacation pay does not.A total of 400 days of sick and vacation days were taken during 2010.
Required:
Prepare the December 31, 2010 year-end accrual for compensated absences.

Accepted Answer

The answer of Claremore Company instituted a vacation and sick...

Question 20

Carl's Video includes the amount of sales taxes collected directly in the price charged for merchandise, and the total amount is credited to Sales.During January, Sales was credited for $239, 680.The January 31 adjusting entry to account for a 7% state sales tax should be

Accepted Answer

A) 
Sales $\quad 15,680$
Sales Taxes Payable $\quad 15,680$ 
B) 
Sales Tax Expense $\quad 15,680$
Sales Taxes Payable $\quad\quad\quad 15,680$ 
C) 
Sales $\quad 16,778$
Sales Taxes Payable$\quad\quad 16,778$ 
D) 
$\begin{array}{cc}
\text { Sales Tax Expense } & 16,778 \
\text { Sales Taxes Payable } && 16,778
\end{array}$ 
A) 
Sales $\quad 15,680$
Sales Taxes Payable $\quad 15,680$ 
B) 
Sales Tax Expense $\quad 15,680$
Sales Taxes Payable $\quad\quad\quad 15,680$ 
C) 
Sales $\quad 16,778$
Sales Taxes Payable$\quad\quad 16,778$ 
D) 
$\begin{array}{cc}
\text { Sales Tax Expense } & 16,778 \
\text { Sales Taxes Payable } && 16,778
\end{array}$

Which of the following statements is true?

Unearned or deferred revenue can occur when

IFRS accounting for contingencies differs from U.S.GAAP in several details.Briefly describe three of those differences.

List and describe the three conditions which must be present for an item to be classified as a liability.

Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing current assets or the creation of other current liabilities within

Which of the following statements regarding the gross and net methods for trade accounts payable is not true?

Management of current liabilities arises, in part, because of a concern over

The operating cycle is typically defined as the time it requires to convert

Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?

Which of the following statements is true?

Listed below are several types of contingencies for the Kauffman Company: Required: Indicate whether the Kauffman Company should make an accrual, a footnote disclosure, or neither of these for each contingency.

When selecting within a range of outcome estimates for probable contingencies, the requirements of IFRS and GAAP, respectively, are to accrue what amount in the range? IFRS GAAP I. minimum minimum II. midpoint minimum III. minimum midpoint IV. midpoint midpoint

Carl's Video includes the amount of sales taxes collected directly in the price charged for merchandise, and the total amount is credited to Sales.During January, Sales was credited for $239, 680.The January 31 adjusting entry to account for a 7% state sales tax should be

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Property, Plant, and Equipment: Acquisition and Disposal

Depreciation and Depletion

Intangibles

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

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Exam 13: Current Liabilities and Contingencies

Which of the following statements is true?

Unearned or deferred revenue can occur when

IFRS accounting for contingencies differs from U.S.GAAP in several details.Briefly describe three of those differences.

List and describe the three conditions which must be present for an item to be classified as a liability.

Current liabilities are obligations whose liquidation is reasonably expected to require the use of existing current assets or the creation of other current liabilities within

Which of the following statements regarding the gross and net methods for trade accounts payable is not true?

Management of current liabilities arises, in part, because of a concern over

The operating cycle is typically defined as the time it requires to convert

Which of the following statements regarding the gross and net methods for recording trade accounts payable is true?

Which of the following statements is true?

Listed below are several types of contingencies for the Kauffman Company: Required: Indicate whether the Kauffman Company should make an accrual, a footnote disclosure, or neither of these for each contingency.

When selecting within a range of outcome estimates for probable contingencies, the requirements of IFRS and GAAP, respectively, are to accrue what amount in the range? IFRS GAAP I. minimum minimum II. midpoint minimum III. minimum midpoint IV. midpoint midpoint

Carl's Video includes the amount of sales taxes collected directly in the price charged for merchandise, and the total amount is credited to Sales.During January, Sales was credited for $239, 680.The January 31 adjusting entry to account for a 7% state sales tax should be

The Environment of Financial Reporting

Financial Reporting: Its Conceptual Framework

Review of a Companys Accounting System

The Balance Sheet and the Statement of Changes in Stockholders Equity

The Income Statement and the Statement of Cash Flows

Additional Aspects of Financial Reporting and Financial Analysis

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Property, Plant, and Equipment: Acquisition and Disposal

Depreciation and Depletion

Intangibles

Long-Term Liabilities and Receivables

Investments

Contributed Capital

Earnings Per Share and Retained Earnings

Income Recognition and Measurement of Net Assets

Accounting for Income Taxes

Accounting for Postemployment Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Time Value of Money Module

Filters