Exam 9: Current Liabilities, Contingencies, and the Time Value of Money

When borrowing money to be repaid in regular future payments, the payment is based on the present value of the loan, the interest rate and the length of the loan.

A company gives a two-year warranty for its product.The estimated liability for product warranties is a current liability.

An amount that has been incurred as an expense, but has not yet been paid should be considered an accrued liability.

$2,000 invested today at 12% with compound interest will yield $2,480 in 2 years.

Warranty expenses are the result of the selling company's estimate of the number of units sold during the current year that may become defective and need repair or replacement during the warranty period.

The landlord records the security deposit she collects from the tenant as an)

Long-term assets are $5,000, current liabilities are $700, and long-term liabilities are $3,000.If the current ratio is 3 to 1, then current assets are

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. The present value of $7,000 to be received in 7 years at 7% compounded annually is

There are some liabilities, such as income tax payable, for which the amounts must be estimated.Failure to estimate these amounts and record them would be a violation of the

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Pablos wants to save some money so that he can make a down payment of $3,000 on a car when he graduates from college 4 years from now.If he opens a savings account and earns 3% on his money, compounded annually, how much will he have to invest now?

A bank loaned York Construction Company $35,000 on a 1-year, 6% note, but deducted the interest in advance. The journal entry made by York to record receipt of the cash would include an

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. How much would have to be deposited in a savings account earning 6%, so that equal annual withdrawals of $200 can be made at the end of each of 10 years? The balance at the end of the last year would be zero.

Current liabilities are defined as those liabilities which will be satisfied

The issue price of a bond is based on the of the cash flows that the bond will produce.

Redfearn Company has current assets of $150,000 and current liabilities of $60,000.How much inventory could it purchase on account and achieve its minimum desired current ratio of 2 to 1?

Which of the following statements regarding the inclusion of liabilities on the statement of cash flows is true?

On October 1, Lawrence Company borrowed $60,000 from Fourth National Bank on a 1-year, 7% note.If the company's fiscal year ends as of December 31, Lawrence should make an entry to increase

A possible loss from lawsuit is not reported on the balance sheet as a current liability.

The of a single sum represents the value today of a single amount to be received or paid at a future time.

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. The table factor for the future value of an annuity for 4 annual deposits at 8% is