Exam 13: Current Liabilities, Provisions, and Contingencies

Which of the following are not factors that are considered when evaluating whether or not to record a liability for pending litigation?

Which of the following is the proper way to report a contingent asset considered probable?

On January 1, 2010, Beyer Co.leased a building to Heins Corp.for a ten-year term at an annual rental of $80,000.At inception of the lease, Beyer received $320,000 covering the first two years' rent of $160,000 and a security deposit of $160,000.This deposit will not be returned to Heins upon expiration of the lease but will be applied to payment of rent for the last two years of the lease.What portion of the $320,000 should be shown as a current and non-current liability, respectively, in Beyer's December 31, 2010 statement of financial position?

A contingent liability

On December 31, 2011, Frye Co.has £4,000,000 of short-term notes payable due on February 28, 2012.On December 23, 2011, Frye arranged a line of credit with County Bank which allows Frye to borrow up to £3,500,000 at one percent above the prime rate for three years.On February 2, 2007, Frye borrowed £2,500,000 from County Bank and used £500,000 additional cash to liquidate £3,000,000 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, 2011 statement of financial position which is issued on March 15, 2012 is

Glaus Corp.signed a three-month, zero-interest-bearing $152,205 note on November 1, 2010 for the purchase of $150,000 of inventory.The adjusting entry made at December 31, 2010 will include a

Use the following information for questions. Vargas Company has 35 employees who work 8-hour days and are paid hourly.On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year.Vacation days earned in 2010 may first be taken on January 1, 2011.Information relative to these employees is as follows: Vargas 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, 2012?

During 2010, Eaton Co.introduced a new product carrying a two-year warranty against defects.The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale.Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011 are as follows: At December 31, 2011, Eaton should report an estimated warranty liability of

Liabilities are

On January 3, 2010, Boyer Corp.owned a machine that had cost $200,000.The accumulated depreciation was $120,000, estimated salvage value was $12,000, and fair value was $320,000.On January 4, 2010, this machine was irreparably damaged by Pine Corp.and became worthless.In October 2010, a court awarded damages of $320,000 against Pine in favor of Boyer.At December 31, 2010, the final outcome of this case was awaiting appeal and was, therefore, uncertain.However, in the opinion of Boyer's attorney, Pine's appeal will be denied.At December 31, 2010, what amount should Boyer accrue for this contingent asset?

Examples of contingent assets include all of the following except:

Yount Trading Stamp Co.records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees.Yount's past experience indicates that only 80% of the stamps sold to licensees will be redeemed.Yount's liability for stamp redemptions was $7,500,000 at December 31, 2010.Additional information for 2011 is as follows: If all the stamps sold in 2011 were presented for redemption in 2011, the redemption cost would be $2,500,000.What amount should Yount report as a liability for stamp redemptions at December 31, 2011?

On September 30, Yang Company signed a HK$150,000, one-year zero-interest-bearing note at First Solvent Bank.Yang's borrowing rate on such obligations is 12% (.89286 present value factor).The September 30 journal entry to record issuance of the note would include:

Which of the following statements is correct?

Vopat, 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, 2010, Vopat remitted $81,480 tax to the state tax division for March 2010 retail sales.What was Vopat 's March 2010 retail sales subject to sales tax?

What condition is necessary to recognize an environmental liability?

The effective interest on a 12-month, zero-interest-bearing note payable of $300,000, discounted at the bank at 10% is

All of the following are true regarding the presentation of current liabilities in the statement of financial position except

How do you determine the acid-test ratio?

Neer Co.has a probable loss that 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 loss accrual should be