Question 1

Which of the following statements is false?

Accepted Answer

A) A company may exclude a short-term obligation from current liabilities if it intends to refinance the obligation on a long-term basis and have an unconditional right to defer settlement of the liability for at least 12 months. 
B) Cash dividends should be recorded as a liability when they are declared by the board of directors. 
C) Under the cash basis method, warranty costs are charged to expense as they are paid. 
D) Social security taxes withheld from employees' payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority. 
A) A company may exclude a short-term obligation from current liabilities if it intends to refinance the obligation on a long-term basis and have an unconditional right to defer settlement of the liability for at least 12 months. 
B) Cash dividends should be recorded as a liability when they are declared by the board of directors. 
C) Under the cash basis method, warranty costs are charged to expense as they are paid. 
D) Social security taxes withheld from employees' payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.

Question 2

Provisions are contingent liabilities which are accrued because the likelihood of an unfavorable outcome is

Accepted Answer

A) virtually certain. 
B) greater than 50%. 
C) at least 75%. 
D) possible. 
A) virtually certain. 
B) greater than 50%. 
C) at least 75%. 
D) possible.

Question 3

Palmer Frosted Flakes Company offers its customers a pottery cereal bowl if they send in 3 boxtops from Palmer Frosted Flakes boxes and $1.00.The company estimates that 60% of the boxtops will be redeemed.In 2010, 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 $2.50 each, how much liability for outstanding premiums should be recorded at the end of 2010?

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 4

Under the expense warranty approach, companies charge warranty costs only to the period in which they comply with the warranty.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following may be a current liability?

Accepted Answer

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

Question 6

What are compensated absences?

Accepted Answer

A) Unpaid time off. 
B) A form of healthcare. 
C) Payroll deductions. 
D) Paid time off. 
A) Unpaid time off. 
B) A form of healthcare. 
C) Payroll deductions. 
D) Paid time off.

Question 7

Of the following items, the only one which should not be classified as a current liability is

Accepted Answer

A) current maturities of long-term debt. 
B) sales taxes payable. 
C) short-term obligations expected to be refinanced. 
D) unearned revenues. 
A) current maturities of long-term debt. 
B) sales taxes payable. 
C) short-term obligations expected to be refinanced. 
D) unearned revenues.

Question 8

An onerous contract is one in which the unavoidable costs of satisfying the obligations outweigh the economic benefits to be received.

Accepted Answer

A) True 
 B)False

Question 9

An electronics store is running a promotion where for every video game purchased, the customer receives a coupon upon checkout to purchase a second game at a 50% discount.The coupons expire in one year.The store normally recognized a gross profit margin of 40% of the selling price on video games.How would the store account for a purchase using the discount coupon?

Accepted Answer

A) The reduction in sales price attributed to the coupon is recognized as premium expense. 
B) The difference between the cost of the video game and the cash received is recognized as premium expense. 
C) Premium expense is not recognized. 
D) The difference between the cost of the video game and the selling price prior to the coupon is recognized as premium expense. 
A) The reduction in sales price attributed to the coupon is recognized as premium expense. 
B) The difference between the cost of the video game and the cash received is recognized as premium expense. 
C) Premium expense is not recognized. 
D) The difference between the cost of the video game and the selling price prior to the coupon is recognized as premium expense.

Which of the following statements is false?

Provisions are contingent liabilities which are accrued because the likelihood of an unfavorable outcome is

Under the expense warranty approach, companies charge warranty costs only to the period in which they comply with the warranty.

Which of the following may be a current liability?

What are compensated absences?

Of the following items, the only one which should not be classified as a current liability is

An onerous contract is one in which the unavoidable costs of satisfying the obligations outweigh the economic benefits to be received.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position 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

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

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Exam 13: Current Liabilities, Provisions, and Contingencies

Which of the following statements is false?

Provisions are contingent liabilities which are accrued because the likelihood of an unfavorable outcome is

Under the expense warranty approach, companies charge warranty costs only to the period in which they comply with the warranty.

Which of the following may be a current liability?

What are compensated absences?

Of the following items, the only one which should not be classified as a current liability is

An onerous contract is one in which the unavoidable costs of satisfying the obligations outweigh the economic benefits to be received.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Statement of Financial Position 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

Non-Current Liabilities

Equity

Dilutive Securities and Earnings Per Share

Investments

Revenue

Accounting for Income Taxes

Accounting for Pensions and Postretirement Benefits

Accounting for Leases

Accounting Changes and Error Analysis

Statement of Cash Flows

Presentation and Disclosure in Financial Reporting

Filters