Exam 13: Current Liabilities and Contingencies

Contingent assets need not be disclosed in the financial statements or in the notes if they are:

Where is debt callable by the creditor reported on the debtor's financial statements?

Each of the following are included in both the current ratio and the acid-test ratio except

Core Trading Stamp Co. records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Core's past experience indicates that only 75% of the stamps sold to licensees will be redeemed. Core's liability for stamp redemptions was $5,000,000 at December 31, 2013. Additional information for 2014 is as follows: If all the stamps sold in 2014 were presented for redemption in 2015, the redemption cost would be $3,000,000. What amount should Core report as a liability for stamp redemptions at December 31, 2014?

Use the following information for questions 110 and 111. Vanco Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2013, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2013 may first be taken on January 1, 2014. Information relative to these employees is as follows: Vanco has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. -What is the amount of the accrued liability for compensated absences that should be reported at December 31, 2015?

On January 3, 2014, Benton Corp. owned a machine that had cost $300,000. The accumulated depreciation was $180,000, estimated salvage value was $18,000, and fair value was $480,000. On January 4, 2014, this machine was irreparably damaged by Pogo Corp. and became worthless. In October 2014, a court awarded damages of $480,000 against Pogo in favor of Benton. At December 31, 2014, the final outcome of this case was awaiting appeal and was, therefore, uncertain. However, in the opinion of Benton's attorney, Pogo's appeal will be denied. At December 31, 2014, what amount should Benton accrue for this gain contingency?

Valley, Inc., is a retail store operating in a state with a 5% retail sales tax. The state law provides that the retail sales tax collected during the month must be remitted to the state during the following month. If the amount collected is remitted to the state on or before the twentieth of the following month, the retailer may keep 3% of the sales tax collected. On April 10, 2014, Valley remitted $135,800 tax to the state tax division for March 2014 retail sales. What was Valley's March 2012 retail sales subject to sales tax?

What is a discount as it relates to zero-interest-bearing notes payable?

A company has not declared a dividend on its cumulative preferred stock for the past three years. What is the required accounting treatment or disclosure in this situation?

The ratio of current assets to current liabilities is called the

Roasten Corp.'s payroll for the pay period ended October 31, 2014 is summarized as follows: What amount should Roasten accrue as its share of payroll taxes in its October 31, 2014 balance sheet?

Use the following information for questions 110 and 111. Vanco Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2013, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2013 may first be taken on January 1, 2014. Information relative to these employees is as follows: Vanco has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. -What is the amount of expense relative to compensated absences that should be reported on Vanco's income statement for 2013?

Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2014 for the purchase of $250,000 of inventory. The face value of the note was $253,900. Assuming Greeson 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, 2014 will include a

On February 10, 2014, after issuance of its financial statements for 2013, Higgins Company entered into a financing agreement with Cleveland Bank, allowing Higgins Company to borrow up to $6,000,000 at any time through 2016. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. Higgins Company presently has $2,250,000 of notes payable with Star National Bank maturing March 15, 2014. The company intends to borrow $3,750,000 under the agreement with Cleveland and liquidate the notes payable to Star National Bank. The agreement with Cleveland also requires Higgins to maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common stock without prior approval by Cleveland Bank. From the above information only, the total short-term debt of Higgins Company as of the December 31, 2013 balance sheet date is

Qualpoint provides its employees two weeks of paid vacation per year. As of December 31, 65 employees have earned two weeks of vacation time to be taken the following year. If the average weekly salary for these employees is $1,140, what is the required journal entry?

Use the following information for questions 100 and 101. Posner Co. is a retail store operating in a state with a 7% retail sales tax. The retailer may keep 2% of the sales tax collected. Posner Co. records the sales tax in the Sales Revenue account. The amount recorded in the Sales Revenue account during May was $251,450. -The amount of sales taxes payable (to the nearest dollar) to the state for the month of May is

On December 31, 2014, Isle Co. has $4,000,000 of short-term notes payable due on February 14, 2015. On January 10, 2013, Isle arranged a line of credit with Beach Bank which allows Isle to borrow up to $3,000,000 at one percent above the prime rate for three years. On February 2, 2015, Isle borrowed $2,400,000 from Beach Bank and used $1,000,000 additional cash to liquidate $3,400,000 of the short-term notes payable. The amount of the short-term notes payable that should be reported as current liabilities on the December 31, 2014 balance sheet which is issued on March 5, 2015 is

Which of the following is a current liability?

Holland Company estimates its annual warranty expense as 2% of annual net sales. The following data relate to the calendar year 2014: Which one of the following entries was made to record the 2014 estimated warranty expense?(assume the accrual method)

Elmer Corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 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?