Exam 13: Current Liabilities, Provisions, and Contingencies

Share dividends distributable should be classified on the

A company gives each of its 50 employees (assume they were all employed continuously through 2010 and 2011) 12 days of vacation a year if they are employed at the end of the year.The vacation accumulates and may be taken starting January 1 of the next year.The employees work 8 hours per day.In 2010, they made $17.50 per hour and in 2011 they made $20 per hour.During 2011, they took an average of 9 days of vacation each.The company's policy is to record the liability existing at the end of each year at the wage rate for that year.What amount of vacation liability would be reflected on the 2010 and 2011 balance sheets, respectively?

On September 1, 2010, Herman 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, 2011.At December 31, 2011, Herman should record accrued interest payable of

Valencia Corporation has the following liabilities at December 31, 2011: Valencia's December 31, 2011 financial statements were issued on March 19, 2012.On January 23, 2012, the entire €1,150,000 balance of the 8.9% note was refinanced by issuance of a long-term obligation payable in a lump sum.In addition, on December 29, 2011, Valencia consummated a non-cancelable agreement with the lender to refinance the 7.25%, €1,080,000 note on a long-term basis, on readily determinable terms that have not yet been implemented.On the December 31, 2011 statement of financial position, the amount of these notes payable that Valencia should classify as short-term obligations is

Which of the following situations may give rise to unearned revenue?

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

Paying a current liability with cash will always reduce the current ratio.

On December 31, 2010, Irey Co.has $2,000,000 of short-term notes payable due on February 14, 2011.On January 10, 2011, Irey arranged a line of credit with County Bank which allows Irey to borrow up to $1,500,000 at one percent above the prime rate for three years.On February 2, 2011, Irey borrowed $1,200,000 from County Bank and used $500,000 additional cash to liquidate $1,700,000 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, 2010 statement of financial position which is issued on March 5, 2011 is

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

Which of the following terms is associated with recognizing a provision?

A provision differs from other liabilities in that there is greater uncertainty about the timing and amount of settlement.

A company must accrue a liability for sick pay that accumulates but does not vest.

On September 1, Hydra purchased $9,500 of inventory items on credit with the terms 1\15, net 30, FOB destination.Freight charges were $200.Payment for the purchase was made on September 18.Assuming Hydra uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as accounts payable from this purchase?

Rendina Inc.offers a cash rebate of Rs50 on each Rs200 package of biscuits sold during the last three months of 2011.Historically, 30% of the company's customers mail in the rebate form.During the last three months of 2011, 7,700,000 packages of biscuits are sold, and 1,470,000 Rs50 rebates are mailed to customers.What is the rebate expense and liability, respectively, shown on the company's 2011 financial statements?

Blitz Corporation, a manufacturer of cleaning products, is preparing annual financial statements at December 31, 2011.Because of a recently proven health hazard in one of its cleaning products, the U.K.government has clearly indicated its intentional of having Blitz recall all cans of this paint sold in the last three months.The management of Ortiz estimates that this recall would cost £5,800,000.What accounting recognition, if any, should be accorded this situation?

Preference dividends in arrears are not a liability until declared by the Board of Directors, but should be disclosed in the notes to the financial statements.

Which of the following is a characteristic of a current liability but not a non-current liability?

All long-term debt maturing within the next year must be classified as a current liability on the statement of financial position.

To record an environmental liability, the cost associated with the liability is

A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized.