Exam 13: Current Liabilities and Contingencies

Stock dividends distributable should be classified on the

Which of the following is a characteristic of the expense warranty approach, but not the sales warranty approach?

Which of the following gives rise to the requirement to accrue a liability for the cost of compensated absences?

IFRS allows for reduced disclosure of contingent liabilities if the disclosure could increase the company`s chance of losing a lawsuit.

Yurman Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to unearned service contract revenues. This account had a balance of $720,000 at December 31, 2013 before year-end adjustment. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $180,000 at December 31, 2013. Outstanding service contracts at December 31, 2013 expire as follows: What amount should be reported as unearned service contract revenues in Yurman's December 31, 2013 balance sheet?

Darren Company becomes aware of a lawsuit after the date of the financial statements, but before they are issued. A loss and related liability should be reported in the financial statements if the amount can be reasonably estimated, an unfavorable outcome is highly probable, and

IFRS uses the term "contingent" for assets and liabilities not recognized in the financial statement.

Which of the following is a current liability?

Palmer Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Palmer Frosted Flakes boxes and $1. The company estimates that 60% of the boxtops will be redeemed. In 2014, the company sold 675,000 boxes of Frosted Flakes and customers redeemed 330,000 boxtops receiving 110,000 bowls. If the bowls cost Palmer Company $3 each, how much liability for outstanding premiums should be recorded at the end of 2014?

Composite provides extended service contracts on electronic equipment sold through major retailers. The standard contract is for four years. During the current year, Composite provided 42,000 such warranty contracts at an average price of $81 each. Related to these contracts, the company spent $400,000 servicing the contracts during the current year and expects to spend $2,100,000 more in the future. What is the net profit that the company will recognize in the current year related to these contracts?

Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty

What is a contingency?

Martinez 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

Snow Co. began operations on January 2, 2014. It employs 15 people who work 8-hour days. Each employee earns 10 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $20.00 in 2014 and $21.25 in 2015. The average vacation days used by each employee in 2015 was 9. Snow Co. accrues the cost of compensated absences at rates of pay in effect when earned. InstructionsPrepare journal entries to record the transactions related to paid vacation days during 2014 and 2015.

During 2013, Rao Co. introduced a new line of machines that carry a three-year warranty against manufacturer's defects. Based on industry experience, warranty costs are estimated at 2% of sales in the year of sale, 3% in the year after sale, and 5% in the second year after sale. Sales and actual warranty expenditures for the first three-year period were as follows: (assume the accrual method) What amount should Rao report as a liability at December 31, 2015? A) $0 B) $134,000 C) $105,000 D) $381,000

Which of these is not included in an employer's payroll tax expense?

Companies should recognize the expense and related liability for compensated absences in the year earned by employees.

tra Processes is involved with innovative approaches to finding energy reserves. Xtra recently built a facility to extract natural gas at a cost of $15 million. However, Xtra is also legally responsible to remove the facility at the end of its useful life of twenty years. This cost is estimated to be $21 million (the present value of which is $8 million). What is the journal entry required to record the asset retirement obligation?

The total payroll of Trolley Company for the month of October, 2014 was $800,000, of which $150,000 represented amounts paid in excess of $106,800 to certain employees. $500,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $150,000 of federal income taxes and $15,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee's wages to $106,800 and 1.45% in excess of $106,800. What amount should Trolley record as payroll tax expense?

Which of the following best describes the accrual method of accounting for warranty costs?