Question 1

A company is legally obligated for the costs associated with the retirement of a long-lived asset

Accepted Answer

A) only when it hires another party to perform the retirement activities. 
B) only if it performs the activities with its own workforce and equipment. 
C) whether it hires another party to perform the retirement activities or performs the activities itself. 
D) when it is probable the asset will be retired. 
A) only when it hires another party to perform the retirement activities. 
B) only if it performs the activities with its own workforce and equipment. 
C) whether it hires another party to perform the retirement activities or performs the activities itself. 
D) when it is probable the asset will be retired. C

Question 2

Which of the following may be a current liability?

Accepted Answer

A) Withheld Income Taxes 
B) Deposits Received from Customers 
C) Deferred Revenue 
D) All of these 
A) Withheld Income Taxes 
B) Deposits Received from Customers 
C) Deferred Revenue 
D) All of these D

Question 3

Mayberry Co.has a loss contingency to accrue.The loss amount can only be reasonably estimated within a range of outcomes.No single amount within the range is a better estimate than any other amount.The amount of loss accrual should be

Accepted Answer

A) zero. 
B) the minimum of the range. 
C) the mean of the range. 
D) the maximum of the range. 
A) zero. 
B) the minimum of the range. 
C) the mean of the range. 
D) the maximum of the range. B

Question 4

Which of the following is a current liability?

Accepted Answer

A) Preferred dividends in arrears 
B) A dividend payable in the form of additional shares of stock 
C) A cash dividend payable to preferred stockholders 
D) All of these 
A) Preferred dividends in arrears 
B) A dividend payable in the form of additional shares of stock 
C) A cash dividend payable to preferred stockholders 
D) All of these

Question 5

Which of the following is not acceptable treatment for the presentation of current liabilities?

Accepted Answer

A) Listing current liabilities in order of maturity 
B) Listing current liabilities according to amount 
C) Offsetting current liabilities against assets that are to be applied to their liquidation 
D) Showing current liabilities immediately below current assets to obtain a presentation of working capital 
A) Listing current liabilities in order of maturity 
B) Listing current liabilities according to amount 
C) Offsetting current liabilities against assets that are to be applied to their liquidation 
D) Showing current liabilities immediately below current assets to obtain a presentation of working capital

Question 6

A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis.

Accepted Answer

A) True 
 B)False

Question 7

A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2007.Historically, 10% of customers mail in the rebate form.During 2007, 4,000,000 packages of light bulbs are sold, and 140,000 $1 rebates are mailed to customers.What is the rebate expense and liability, respectively, shown on the 2007 financial statements dated December 31?

Accepted Answer

A) $400,000; $400,000 
B) $400,000; $260,000 
C) $260,000; $260,000 
D) $140,000; $260,000 
A) $400,000; $400,000 
B) $400,000; $260,000 
C) $260,000; $260,000 
D) $140,000; $260,000

Question 8

On September 1, 2006, Looper Co.issued a note payable to National Bank in the amount of $1,200,000, bearing interest at 12%, and payable in three equal annual principal payments of $400,000.On this date, the bank's prime rate was 11%.The first payment for interest and principal was made on September 1, 2007.At December 31, 2007, Looper should record accrued interest payable of

Accepted Answer

A) $48,000. 
B) $44,000. 
C) $32,000. 
D) $29,334. 
A) $48,000. 
B) $44,000. 
C) $32,000. 
D) $29,334.

Question 9

Grogan Corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 60,000 shares of common stock.If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities?

Accepted Answer

A) $1,200,000 
B) $1,800,000 
C) $600,000 
D) $0 
A) $1,200,000 
B) $1,800,000 
C) $600,000 
D) $0

Question 10

The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a correct statement about sales taxes?

Accepted Answer

A) Sales taxes are an expense of the seller. 
B) Many companies record sales taxes in the sales account. 
C) If sales taxes are included in the sales account, the first step to find the amount of sales taxes is to divide sales by 1 plus the sales tax rate. 
D) All of these are true. 
A) Sales taxes are an expense of the seller. 
B) Many companies record sales taxes in the sales account. 
C) If sales taxes are included in the sales account, the first step to find the amount of sales taxes is to divide sales by 1 plus the sales tax rate. 
D) All of these are true.

Question 12

A company buys an oil rig for $1,000,000 on January 1, 2007.The life of the rig is 10 years and the expected cost to dismantle the rig at the end of 10 years is $200,000 (present value at 10% is $77,110).10% is an appropriate interest rate for this company.What expense should be recorded for 2007 as a result of these events?

Accepted Answer

A) Depreciation expense of $120,000 
B) Depreciation expense of $100,000 and interest expense of $7,711 
C) Depreciation expense of $100,000 and interest expense of $20,000 
D) Depreciation expense of $107,710 and interest expense of $7,711 
A) Depreciation expense of $120,000 
B) Depreciation expense of $100,000 and interest expense of $7,711 
C) Depreciation expense of $100,000 and interest expense of $20,000 
D) Depreciation expense of $107,710 and interest expense of $7,711

Question 13

Milner Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Milner Frosted Flakes boxes and $1.00.The company estimates that 60% of the boxtops will be redeemed.In 2007, the company sold 675,000 boxes of Frosted Flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls.If the bowls cost Milner Company $2.50 each, how much liability for outstanding premiums should be recorded at the end of 2007?

Accepted Answer

A) $25,000 
B) $37,500 
C) $62,500 
D) $87,500 
A) $25,000 
B) $37,500 
C) $62,500 
D) $87,500

Question 14

Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Madison National Bank.These are 90-day notes, renewable for another 90-day period.These notes should be classified on the balance sheet of Lance Company as

Accepted Answer

A) current liabilities. 
B) deferred charges. 
C) long-term liabilities. 
D) intermediate debt. 
A) current liabilities. 
B) deferred charges. 
C) long-term liabilities. 
D) intermediate debt.

Question 15

Which of the following is a current liability?

Accepted Answer

A) A long-term debt maturing currently, which is to be paid with cash in a sinking fund 
B) A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue 
C) A long-term debt maturing currently, which is to be converted into common stock 
D) None of these 
A) A long-term debt maturing currently, which is to be paid with cash in a sinking fund 
B) A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue 
C) A long-term debt maturing currently, which is to be converted into common stock 
D) None of these

Question 16

Liabilities are

Accepted Answer

A) any accounts having credit balances after closing entries are made. 
B) deferred credits that are recognized and measured in conformity with generally accepted accounting principles. 
C) obligations to transfer ownership shares to other entities in the future. 
D) obligations arising from past transactions and payable in assets or services in the future. 
A) any accounts having credit balances after closing entries are made. 
B) deferred credits that are recognized and measured in conformity with generally accepted accounting principles. 
C) obligations to transfer ownership shares to other entities in the future. 
D) obligations arising from past transactions and payable in assets or services in the future.

Question 17

Edson Corp.signed a three-month, zero-interest-bearing note on November 1, 2007 for the purchase of $150,000 of inventory.The face value of the note was $152,205.Assuming Edson used a "Discount on Note Payable" account to initially record the note and that the discount will be amortized equally over the 3-month period, the adjusting entry made at December 31, 2007 will include a

Accepted Answer

A) debit to Discount on Note Payable for $735. 
B) debit to Interest Expense for $1,470. 
C) credit to Discount on Note Payable for $735. 
D) credit to Interest Expense for $1,470. 
A) debit to Discount on Note Payable for $735. 
B) debit to Interest Expense for $1,470. 
C) credit to Discount on Note Payable for $735. 
D) credit to Interest Expense for $1,470.

Question 18

The ability to consummate the refinancing of a short-term obligation may be demon- strated by

Accepted Answer

A) actually refinancing the obligation by issuing a long-term obligation after the date of the balance sheet but before it is issued. 
B) entering into a financing agreement that permits the enterprise to refinance the debt on a long-term basis. 
C) actually refinancing the obligation by issuing equity securities after the date of the balance sheet but before it is issued. 
D) all of these. 
A) actually refinancing the obligation by issuing a long-term obligation after the date of the balance sheet but before it is issued. 
B) entering into a financing agreement that permits the enterprise to refinance the debt on a long-term basis. 
C) actually refinancing the obligation by issuing equity securities after the date of the balance sheet but before it is issued. 
D) all of these.

Question 19

Pryor Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 4 boxtops from Pryor Frosted Flakes boxes and $1.00.The company estimates that 60% of the boxtops will be redeemed.In 2007, the company sold 500,000 boxes of Frosted Flakes and customers redeemed 220,000 boxtops receiving 55,000 bowls.If the bowls cost Pryor Company $2.50 each, how much liability for outstanding premiums should be recorded at the end of 2007?

Accepted Answer

A) $20,000 
B) $30,000 
C) $50,000 
D) $70,000 
A) $20,000 
B) $30,000 
C) $50,000 
D) $70,000

Question 20

All long-term debt maturing within the next year must be classified as a current liability on the balance sheet.

Accepted Answer

A) True 
 B)False

A company is legally obligated for the costs associated with the retirement of a long-lived asset

Which of the following may be a current liability?

Mayberry Co.has a loss contingency to accrue.The loss amount can only be reasonably estimated within a range of outcomes.No single amount within the range is a better estimate than any other amount.The amount of loss accrual should be

Which of the following is a current liability?

Which of the following is not acceptable treatment for the presentation of current liabilities?

A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis.

The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability.

Which of the following is not a correct statement about sales taxes?

Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Madison National Bank.These are 90-day notes, renewable for another 90-day period.These notes should be classified on the balance sheet of Lance Company as

Which of the following is a current liability?

Liabilities are

The ability to consummate the refinancing of a short-term obligation may be demon- strated by

All long-term debt maturing within the next year must be classified as a current liability on the balance sheet.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Filters

Exam 13: Current Liabilities and Contingencies

A company is legally obligated for the costs associated with the retirement of a long-lived asset

Which of the following may be a current liability?

Mayberry Co.has a loss contingency to accrue.The loss amount can only be reasonably estimated within a range of outcomes.No single amount within the range is a better estimate than any other amount.The amount of loss accrual should be

Which of the following is a current liability?

Which of the following is not acceptable treatment for the presentation of current liabilities?

A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis.

The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability.

Which of the following is not a correct statement about sales taxes?

Among the short-term obligations of Lance Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Madison National Bank.These are 90-day notes, renewable for another 90-day period.These notes should be classified on the balance sheet of Lance Company as

Which of the following is a current liability?

Liabilities are

The ability to consummate the refinancing of a short-term obligation may be demon- strated by

All long-term debt maturing within the next year must be classified as a current liability on the balance sheet.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Depreciation, Impairments, and Depletion

Intangible Assets

Filters