Exam 9: Current Liabilities and Contingent Obligations

Which of the following statements is not true?

Voluntary payroll deductions may include all of the following except

Bonus agreements can be structured in various ways. A typical bonus calculation could involve income before or after taxes and income before or after the bonus.

A gain contingency that is reasonably possible and for which the amount can be reasonably estimated should be

Which of the following loss contingencies is not usually accrued?

Management of current liabilities arises, in part, because of a concern over

Which of the following contingencies is usually accrued?

On January 1, 2015, Peg, Inc. bought some equipment by signing a non-interest-bearing note for $160,000. The note is to be paid in four equal annual $40,000 payments, beginning on December 31, 2015. Current interest rates were 8%. The present value and future value information for 8%, 4 periods follows: Required: Prepare the journal entries necessary on January 1, 2015, and December 31, 2015.

Explain the deficiencies in accounting for warranty costs under the modified cash basis.

The operating cycle is typically defined as the time it requires to convert

How are current liabilities classified? Provide an example of each.

Existing claims related to product warranties and litigation as of December 31, 2016, indicate that it is probable that a liability has been incurred. However, as of December 31, 2016, the amount of the obligation cannot be reasonably estimated. Based on these facts, an estimated loss contingency should be

Excellence, Inc., places a coupon in each box of its product. Customers may send in ten coupons and $2.50, and the company will send them a CD. Sufficient CDs were purchased at $6 a piece to meet the expected demand. A certain number of boxes of product were sold in 2016. It was estimated that a total of 5% of the coupons will be redeemed. In 2016, 18,000 coupons were redeemed. Mailing costs were $0.75 per CD. At December 31, 2016, the following adjusting entry was made to record the estimated liability for premium outstanding: Premium Expense $\quad$ $\quad$ 25,500 Estimated Premium Claims Outstanding $\quad$ $\quad$ 25,500 Required: Compute the number of boxes of product sold by Excellence in 2016.

Concerning accounting for warranties, which of the following statements is true?

American Business Services introduced a new machine on January 1, 2016. The machine carried a two-year warranty against defects. The estimated warranty costs related to dollar sales were 3% in the year of sale and 5% in the year after sale. Additional information follows: Actual Warranty If American Business Services considers these warranties to be assurance-type and accounts for them by accruing the expense and the related liability) in the year of the sale, what amount relating to warranties should be reflected on the December 31, 2017, balance sheet?

Exhibit 9-1 The Happy Cereal Company includes a premium in each box of its cereal. For four premiums plus $2.00, customers are entitled to a plastic wiggle worm that costs Happy $4.50 each. Happy expects 60% of the premiums to be redeemed. In 2016, Happy sold 500,000 boxes of cereal and distributed 25,000 wiggle worms. -Refer to Exhibit 9-1. What is Happy's premium expense for 2016?

Unearned revenue also called deferred revenue) can occur when

Current liabilities are obligations of a company that it expects to liquidate within

Under current standards of the FASB, liabilities include

What are the FASB's broad guidelines for reporting assets, liabilities, and equity on the balance sheet?