Exam 13: Operating Liabilities and Contingencies

The obligation for compensated absences includes amounts payable for future holidays.

What are the three characteristics of a liability as defined in the conceptual framework?

Which of the following terms refers to gift card sales that are never redeemed?

Lifeline Biofuels built an oil rig at a cost of $4.5 million. At the time that construction was complete, the company estimated the oil rig would have a useful life of 20 years (with no salvage value), after which Federal regulations would require that the oil rig be dismantled and the land area restored. The fair value of this asset retirement project was $815,000 and the present value of these asset retirement costs was $307,000 based on the 5% after-tax discount rate. At the end of the 20 year life, the company dismantles the oil rig and restores the land at a cost of $890,000. Following U.S. GAAP, the journal entry to record the completion of the restoration process would include:

Under IFRS, provisions for contingent losses are accrued when the likelihood of an unfavorable outcome is ________.

In order to accrue a litigation-related liability, the company must be aware of the lawsuit before the company's year-end.

On June 1, 2018, Superior Insurance Company collected $490,000 for a 2-year insurance policy beginning on the same date. The company has a December 31 year end. How much Insurance Revenue will be recognized in 2018? (Do not round any intermediary calculations. Round your final answer to the nearest dollar.)

The deposit liability account is debited when it is determined that deposits will not be returned.

Lifeline Biofuels built an oil rig at a cost of $10.5 million. The company estimates the oil rig will have a useful life of 20 years (with no salvage value), after which Federal regulations require that the oil rig must be dismantled and the land area restored. The fair value of the costs of this asset retirement project is $900,000. The present value of these asset retirement costs is $280,000 based on the 6% after-tax discount rate. Under U.S. GAAP, what is the initial capitalized carrying value of the oil rig at the completion of construction?

Which of the following is not a characteristic of a liability?

Which of the following is also referred to as deferred credits?

Whenever the probability of occurrence of a gain contingency is more likely than not, companies typically disclose that contingency in the footnotes.

How do GAAP and IFRS differ in the treatment of compensated absences?

Which type of contingency are companies most likely to disclose in their annual report?

How is accounting for loss contingencies different under IFRS as compared to U.S. GAAP?

More contingencies are reported on the balance sheet under U.S. GAAP than under IFRS because of different definitions of "probable."

Contingent gains are generally not recognized in the financial statements due to conservatism.

A promotional item offered to buyers of specific products is called ________.

Describe how to account for warranty costs if the warranty is determined to be a service-type warranty. How does this differ from accounting for an assurance-type warranty?

Gift card breakage represents an estimate of the value of gift cards that will not be redeemed.