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

Boston Trombley Company is a defendant in a lawsuit alleging damages of $3 billion.The litigation is anticipated to continue for several years, but no reasonable estimate can be made at this time regarding ultimate financial responsibility.This situation is an example of:

If you plan to invest $10,000 and want to determine how much will be accumulated in six years if you earn interest at 7% per year, you would calculate this using the future value of an annuity.

If the annual interest is 12%, but the compounding is done quarterly, then the interest rate is 4% per period.

On November 1, 2014, Chancellor Co.borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity.The interest on this loan is stated separately.At December 31, 2014, Chancellor Co.'s overall liability for this loan amounts to:

include any amount that has been incurred due to the passage of time, but not paid as of the balance sheet date.

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 future value of $6,000 at 12% compounded quarterly for 5 years is

Almost all current liabilities affect the operating category of the statement of cash flows, but one that does not affect cash provided by operating activities is

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. To calculate the future value of an amount that is invested at 12%, compounded quarterly, at the end of three years, the interest factor used would be

Curtain Corp.stands to receive a sufficient cash settlement from a law suit.Curtain needs to record this on its accounting records.

On November 1, 2014, Chancellor Co.borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity.The interest on this loan is stated separately.At December 31, 2014, the adjusting entry for this note includes a:

Generally, an increase in a current liability results in an increase in the operating activities category of the cash flow statement.

Which of the following would appear on the balance sheet as a current liability?

In 2015, Morton Co.sold 100 hot air balloons at $4,000 each.The balloons carry a 5-year warranty for defects.Morton estimates that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $42,000.$11,000 in claims was actually incurred during the year to honor their warranty.What was the balance in the ending estimated warranty liability at the end of the year?

Which of the following statements regarding contingencies is true?

If a company purchases $3,000 worth of inventory with terms of 1/15, n30 and pays within 15 days, then the amount paid to the seller would be

Which of the following statements is true of liabilities?

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. If Shidan has $5,000 to invest and wants to have $10,000 at the end of 9 years, what compounded interest rate must she get on her money assume annual compounding)?

You are interested in accumulating $10,000 so that you can take a cruise in 3 years.If you trying to solve for the amount that you need to invest each year, earning 6% interest compounded annually, the $10,000 represents:

All of the following statements are true except:

An example of a current liability that must be accrued is