Question 1

Explain some of the challenges that exist in determining the amount of a "liability" by identifying factors that influence the value of the indebtedness.

Accepted Answer

Factors include whether:
• the obligatio

Question 2

Explain the meaning of "provision" and give an example.

Accepted Answer

A provision is a liability for which the

Question 3

For a $100,000 trade payable with terms of 2/10, net 45, how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Accepted Answer

A) $0 
B) $2,000 
C) $4,500 
D) $10,000 
A) $0 
B) $2,000 
C) $4,500 
D) $10,000

Question 4

Which of the following is true about non-interest bearing notes?

Accepted Answer

A) The most common method of determining the fair value of non-interest bearing notes is the discounted cash flow analysis. 
B) Non-interest bearing short-term payables may never be measured at the original invoice amount. 
C) A rule of thumb is to use the face value for non-interest bearing notes payable with a duration of greater than 90 days. 
D) A rule of thumb is to use the market value for non-interest bearing notes payable with a duration of 90 days or less. 
A) The most common method of determining the fair value of non-interest bearing notes is the discounted cash flow analysis. 
B) Non-interest bearing short-term payables may never be measured at the original invoice amount. 
C) A rule of thumb is to use the face value for non-interest bearing notes payable with a duration of greater than 90 days. 
D) A rule of thumb is to use the market value for non-interest bearing notes payable with a duration of 90 days or less.

Question 5

Which statement is correct about provisions, contingent assets and contingent liabilities?

Accepted Answer

A) The same probability threshold is used to record contingent liabilities and provisions. 
B) The same probability threshold is used to record contingent assets and contingent liabilities. 
C) Possible contingent liabilities are recorded. 
D) Virtually certain contingent assets are recorded. 
A) The same probability threshold is used to record contingent liabilities and provisions. 
B) The same probability threshold is used to record contingent assets and contingent liabilities. 
C) Possible contingent liabilities are recorded. 
D) Virtually certain contingent assets are recorded.

Question 6

Fill in the following chart.

Accepted Answer

The answer of Fill in the following chart.
 
...

Question 7

Which statement about sales taxes is correct?

Accepted Answer

A) The consumer is responsible for remitting the tax to the government. 
B) Taxes are uniformly applied to all sale transactions. 
C) Businesses can deduct the GST paid on their purchases from GST collected. 
D) The same products that are exempt from GST are exempt from PST. 
A) The consumer is responsible for remitting the tax to the government. 
B) Taxes are uniformly applied to all sale transactions. 
C) Businesses can deduct the GST paid on their purchases from GST collected. 
D) The same products that are exempt from GST are exempt from PST.

Question 8

Which statement about contingencies is correct?

Accepted Answer

A) If the future outcome is possible and reliably measurable, a provision is recorded. 
B) If the future outcome is probable and reliably measurable, a provision is recorded. 
C) If the future outcome is probable, a provision is recorded even if it is not reliably measurable. 
D) If the future outcome is possible, a provision is recorded even if it is not reliably measurable. 
A) If the future outcome is possible and reliably measurable, a provision is recorded. 
B) If the future outcome is probable and reliably measurable, a provision is recorded. 
C) If the future outcome is probable, a provision is recorded even if it is not reliably measurable. 
D) If the future outcome is possible, a provision is recorded even if it is not reliably measurable.

Question 9

Which is a reason to use the net method to record purchase discounts?

Accepted Answer

A) Cost-benefit factor is greater for the net method. 
B) Reporting "purchase discounts lost" signifies inefficient business practices. 
C) Given the materiality of the amounts involved, the net method is used. 
D) The net method is technically superior to the gross method. 
A) Cost-benefit factor is greater for the net method. 
B) Reporting "purchase discounts lost" signifies inefficient business practices. 
C) Given the materiality of the amounts involved, the net method is used. 
D) The net method is technically superior to the gross method.

Question 10

Which statement about contingent liabilities is correct?

Accepted Answer

A) It is a present obligation that will probably result in the economic outflow of resources. 
B) It involves uncertainty about either the timing of payment or the amount of payment. 
C) It is an obligation that arises from past transactions and events and can be reliably measured. 
D) It is a present obligation that arises from past events but it cannot be reliably measured. 
A) It is a present obligation that will probably result in the economic outflow of resources. 
B) It involves uncertainty about either the timing of payment or the amount of payment. 
C) It is an obligation that arises from past transactions and events and can be reliably measured. 
D) It is a present obligation that arises from past events but it cannot be reliably measured.

Question 11

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Accepted Answer

Financial guarantee contract: A contract

Question 12

Indemnities and letters of credit are examples of?

Accepted Answer

A) Commitments. 
B) Provisions. 
C) Contingencies. 
D) Guarantees. 
A) Commitments. 
B) Provisions. 
C) Contingencies. 
D) Guarantees.

Question 13

For each independent situation:
1. Langford Airport Parking Ltd. awards customers 250 reward miles per stay, in a well-known airline mileage program. Langford pays the airline $0.06 for each mile. Langford, which is not an agent for the airline, estimates that the fair value of the miles is the same as the price paid-$0.06. Parking revenues on May 24, 2020 were $52,000. Langford awarded 40,000 airline points to its customers.
2. On October 15, 2020, Hamilton Windows and Sash properly recorded the issue of a $12,000, 7% note due April 15, 2021. Hamilton is preparing its financial statements for the year ended December 31, 2021. Hamilton does not make adjusting entries during the year.
Required:
For each of the situations described above, prepare the required journal entry for the underlined entity. If a journal entry is not required, explain why.

Accepted Answer

1. This is a third-party rewar

Question 14

Which statement is correct?

Accepted Answer

A) Contingencies arise from future events. 
B) The amount to be paid for contingencies is known or reasonably estimable. 
C) Current liabilities arise from future events. 
D) The amount to be paid for current liabilities is known or reasonably estimable. 
A) Contingencies arise from future events. 
B) The amount to be paid for contingencies is known or reasonably estimable. 
C) Current liabilities arise from future events. 
D) The amount to be paid for current liabilities is known or reasonably estimable.

Question 15

Which statement about deferred revenue is correct?

Accepted Answer

A) Deferred revenue is a financial liability. 
B) Deferred revenue is a non-financial liability. 
C) Deferred revenue is a held for trading financial liability. 
D) Deferred revenue arises when the contract is signed. 
A) Deferred revenue is a financial liability. 
B) Deferred revenue is a non-financial liability. 
C) Deferred revenue is a held for trading financial liability. 
D) Deferred revenue arises when the contract is signed.

Question 16

Consider the following independent situations. The underlined entity is the reporting entity.
1. The Supreme Court of Canada ordered a supplier to pay Towna Haring Inc. $500,000 for breach of contract.
2. Iwas Pharmaceuticals Inc. sued Game Day Agencies Ltd. for $8 million alleging patent infringement. While there may be some substance to Iwas's assertion, Game Day's legal counsel estimates that Iwas's likelihood of success is about 30%.
3. Environment Canada sued Foil Fan Isotopes Ltd. for $18 million seeking to recover the costs of cleaning up Foil Fan's accidental discharge of radioactive materials. Foil Fan acknowledges liability but is disputing the amount, claiming that the actual costs are in the range of$9 million to $12 million. Foil Fan's $18 million environmental insurance policy includes a $6 million deductible clause.
Required:
a. For each of the situations, indicate whether the appropriate accounting treatment is to:
A. Recognize an asset or liability.
B. Disclose the details of the contingency in the notes to the financial statements.
C. Neither provides for the item nor disclose the circumstances in the notes to the financial statements.
b. For each situation that requires the recognition of an asset or liability, record the journal entry.

Accepted Answer

1. (A)
Answer = A. Recognize an asset or

Question 17

Contrast the gross method with the net method of recording purchase discounts by completing the following table:

Accepted Answer

The answer of Contrast the gross method with the net...

Question 18

For the following transaction, provide all of the required journal entries from inception to liquidation. Assume a December 31 year-end and that the company does not prepare interim statements. Round all amounts to nearest dollar. $\begin{array}{lr}
\text { Face value of note payable } & \$ 200,000 \
\text { Date of issue for note } & \text { May } 1,2019 \
\text { Due date for note } & \text { May } 1,2020 \
\text { Interest rate in the note } & 5 \% \
& \text { (interest due at maturity) } \
\text { Market rate of interest } & 5 \% \
\text { Consideration received } & \text { Cash }
\end{array}$

Accepted Answer

The answer of For the following transaction, provide all of...

Question 19

Which statement is correct under the IFRS definition for a "liability"?

Accepted Answer

A) The obligating event must be probable before the liability can be recognized. 
B) The obligating event must be virtually certain before the liability can be recognized. 
C) A reliable measure of the obligation must exist before the liability can be recognized. 
D) A precise measure of the obligation must exist before the liability can be recognized. 
A) The obligating event must be probable before the liability can be recognized. 
B) The obligating event must be virtually certain before the liability can be recognized. 
C) A reliable measure of the obligation must exist before the liability can be recognized. 
D) A precise measure of the obligation must exist before the liability can be recognized.

Question 20

Consider the following independent situations. The underlined entity is the reporting entity.
1. Call Cattle Inc. sued Nutrient Feed Ltd. for $10 million alleging breach of contract. Nutrient's legal counsel estimates that Call's likelihood of success is about 80%. Based on its experience with cases of this nature, the law firm estimates that, if successful, the litigants will be awarded $8,800,000 to $9,000,000, with all payouts in this range being equally likely.
2. Deana Finnamore broke her leg when she tripped on an uneven floor surface in Groton Co.'s office. On the advice of legal counsel, Groton has offered Finnamore $140,000 to settle her $275,000 lawsuit. It is unknown whether Finnamore will accept the settlement offer. Groton's legal counsel estimates that Finnamore has a 90% probability of success, and that if successful, she will be awarded $230,000.
3. The courts ordered a competitor to pay $1,000,000 to Ferbert and Finn Corp. for patent infringement. The competitor's legal counsel indicated that the company will probably appeal the amount of the award.
Required:
a. For each of the situations, indicate whether the appropriate accounting treatment is to:
A. Recognize an asset or liability.
B. Disclose the details of the contingency in the notes to the financial statements.
C. Neither provide for the item nor disclose the circumstances in the notes to the financial statements.
b. For each situation that requires the recognition of an asset or liability, record the journal entry.

Accepted Answer

1. (A)
Answer = A. Recognize an asset or

Explain some of the challenges that exist in determining the amount of a "liability" by identifying factors that influence the value of the indebtedness.

Explain the meaning of "provision" and give an example.

For a $100,000 trade payable with terms of 2/10, net 45, how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Which of the following is true about non-interest bearing notes?

Which statement is correct about provisions, contingent assets and contingent liabilities?

Fill in the following chart.

Which statement about sales taxes is correct?

Which statement about contingencies is correct?

Which is a reason to use the net method to record purchase discounts?

Which statement about contingent liabilities is correct?

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Indemnities and letters of credit are examples of?

Which statement is correct?

Which statement about deferred revenue is correct?

Contrast the gross method with the net method of recording purchase discounts by completing the following table:

Which statement is correct under the IFRS definition for a "liability"?

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Accounting for Income Taxes

Accounting Changes

Statement of Cash Flows

Filters

Exam 1: Current Liabilities and Contingencies

Explain some of the challenges that exist in determining the amount of a "liability" by identifying factors that influence the value of the indebtedness.

Explain the meaning of "provision" and give an example.

For a $100,000 trade payable with terms of 2/10, net 45, how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Which of the following is true about non-interest bearing notes?

Which statement is correct about provisions, contingent assets and contingent liabilities?

Fill in the following chart.

Which statement about sales taxes is correct?

Which statement about contingencies is correct?

Which is a reason to use the net method to record purchase discounts?

Which statement about contingent liabilities is correct?

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Indemnities and letters of credit are examples of?

Which statement is correct?

Which statement about deferred revenue is correct?

Contrast the gross method with the net method of recording purchase discounts by completing the following table:

Which statement is correct under the IFRS definition for a "liability"?

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Accounting for Income Taxes

Accounting Changes

Statement of Cash Flows

Filters