Question 1

Which statement is correct about provisions,contingent assets and contingent liabilities?

Accepted Answer

A) The same probability threshold is used to record contingent liabilities and provisions. 
B) The same probability threshold is used to record contingent assets and contingent liabilities. 
C) Possible contingent liabilities are recorded. 
D) Virtually certain contingent assets are recorded. 
A) The same probability threshold is used to record contingent liabilities and provisions. 
B) The same probability threshold is used to record contingent assets and contingent liabilities. 
C) Possible contingent liabilities are recorded. 
D) Virtually certain contingent assets are recorded.

Question 2

Which is not a current liability?

Accepted Answer

A) Accounts payable due in 120 days. 
B) Bank loan due in three years that is in default. 
C) Bonds payable maturing in five years. 
D) Certain held for trading liabilities. 
A) Accounts payable due in 120 days. 
B) Bank loan due in three years that is in default. 
C) Bonds payable maturing in five years. 
D) Certain held for trading liabilities.

Question 3

A company,using a perpetual inventory system,sells goods on credit for $10,000. The applicable PST rate is 5% and the GST rate is 10%. The cost of goods sold was $6,000. Sales taxes are remitted on a monthly basis. Prepare the necessary journal entries for this transaction.

Accepted Answer

Sale of go

Question 4

Which statement about contingent liabilities is correct?

Accepted Answer

A) It is a present obligation that will probably result in the economic outflow of resources. 
B) It involves uncertainty about either the timing of payment or the amount of payment. 
C) It is an obligation that arises from past transactions and events and can be reliably measured. 
D) It is a present obligation that arises from past events but it cannot be reliably measured. 
A) It is a present obligation that will probably result in the economic outflow of resources. 
B) It involves uncertainty about either the timing of payment or the amount of payment. 
C) It is an obligation that arises from past transactions and events and can be reliably measured. 
D) It is a present obligation that arises from past events but it cannot be reliably measured.

Question 5

For each independent situation:
1. A former employee of Melvin Minimarket Inc. sued the company for $900,000,alleging that the company owner sexually harassed her. Melvin's lawyers suggest that the lawsuit has a 30-40% probability of success and that,if successful,the plaintiff will be awarded between $400,000 and $500,000.
2. Leduc Pyrotechnics Ltd. received a $15,000 fee to guarantee the $800,000 bank indebtedness of Kenora Fireworks Inc. The fair value of the guarantee is initially estimated to be $15,000.
3. Montomery Syringes Co. sued a competitor for $800,000,alleging corporate espionage. Montomery's legal counsel believes that the company will be successful and will be awarded somewhere in the range of $650,000 to $800,000.
Requirement:
Describe how the event should be dealt with in the financial statements and explain why. Prepare all required journal entries.

Accepted Answer

1. This contingent liability does not ne

Question 6

Which statement is correct?

Accepted Answer

A) Trade payables are supported by a written promise to pay. 
B) Trade payables with no stated interest rate do not need to be discounted. 
C) Notes payable are legally enforceable and can only be interest bearing. 
D) Notes payables are recognized at the face value or transaction price. 
A) Trade payables are supported by a written promise to pay. 
B) Trade payables with no stated interest rate do not need to be discounted. 
C) Notes payable are legally enforceable and can only be interest bearing. 
D) Notes payables are recognized at the face value or transaction price.

Question 7

GOT Jetski Corp. has sold motorized watercraft for a number of years. GOT includes a three-year warranty on each watercraft they sell. Management estimates that the cost of providing the warranty coverage is 2% of sales in the first year and 3% of sales in each of years two and three. Other facts follow:
• GGT reported a $270,000 provision for warranty payable on its December 31,2012 balance sheet.
• GGT's sales for 2013 totalled $6,000,000 spread evenly through the year.
• The cost to GGT of meeting their warranty claims in 2013 was $480,000; $300,000 for parts and $180,000 for labour.
• GGT's sales for 2014 totalled $6,200,000 spread evenly through the year.
• The cost to GGT of meeting their warranty claims in 2014 was $468,000; $280,800 for parts and $187,200 for labour. Based on recent claims history,GGT revises their 2014 warranty provision to 9% of sales.
Requirements:
a. Prepare summary journal entries to record warranty expense and warranty claims in 2013 and 2014.
b. Determine the provision for warranty payable that GGT will report as a liability on December 31,2014.

Accepted Answer

To recognize the provision in 2013 @#IMG-DLM& To r

Question 8

A clothing store maintains a loyalty program for its customers. Members receive points for every purchase which do not expire. In fiscal 2012,the store made sales of $1 million and awarded 50,000 points that have a fair value of $50,000. The company estimates that approximately 75% of these points will be redeemed by members. Members redeemed 10,000 points in fiscal 2013.
Provide the necessary journal entries for fiscal 2012 and 2013.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& 10,000 points ∗ [$

Question 9

Which of the following characteristic is required for a "liability" under IFRS Framework?

Accepted Answer

A) A past obligation. 
B) A present obligation. 
C) An unknown obligation. 
D) A future obligation. 
A) A past obligation. 
B) A present obligation. 
C) An unknown obligation. 
D) A future obligation.

Question 10

Which statement about contingencies is correct?

Accepted Answer

A) It involves only potential economic outflows of resources. 
B) It is a possible condition that depends upon the outcome of a future event. 
C) It involves uncertainty about either the timing or amount of payment. 
D) It is an existing condition that depends upon the outcome of a future event. 
A) It involves only potential economic outflows of resources. 
B) It is a possible condition that depends upon the outcome of a future event. 
C) It involves uncertainty about either the timing or amount of payment. 
D) It is an existing condition that depends upon the outcome of a future event.

Which statement is correct about provisions,contingent assets and contingent liabilities?

Which is not a current liability?

A company,using a perpetual inventory system,sells goods on credit for $10,000. The applicable PST rate is 5% and the GST rate is 10%. The cost of goods sold was $6,000. Sales taxes are remitted on a monthly basis. Prepare the necessary journal entries for this transaction.

Which statement about contingent liabilities is correct?

Which statement is correct?

Which of the following characteristic is required for a "liability" under IFRS Framework?

Which statement about contingencies is correct?

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters

Exam 1: Current Liabilities and Contingencies

Which statement is correct about provisions,contingent assets and contingent liabilities?

Which is not a current liability?

A company,using a perpetual inventory system,sells goods on credit for $10,000. The applicable PST rate is 5% and the GST rate is 10%. The cost of goods sold was $6,000. Sales taxes are remitted on a monthly basis. Prepare the necessary journal entries for this transaction.

Which statement about contingent liabilities is correct?

Which statement is correct?

Which of the following characteristic is required for a "liability" under IFRS Framework?

Which statement about contingencies is correct?

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters