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

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.

Which of the following accounts is not classified as a current liability?

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The present amount that is equivalent to an amount at a future time.

Auto Designs, Inc. Use the selected data from the comparative financial statements for Auto Designs, Inc. to answer the questions that follow. -Refer to the account information for Auto Designs, Inc. REQUIRED: Calculate the current and quick ratios for 2015 and 2014. Comment on the direction and significance of the change in the ratios.

U.S. standards do not require a classified balance sheet, but International accounting standards require companies to present classified balance sheets with liabilities classified as either current or long term.

In the statement of cash flows, an increase in a current liability will appear as an increase in the Financing category.

A current ratio of or better is usually considered a comfortable margin.

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?

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 total amount of interest compounded quarterly on a $1,500 note payable for 1 year at 12% is

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as

Using the indirect method, an increase in accounts payable would be shown as an in the Activities section of the statement of cash flows.

An annuity is a series of equal payments made at equal intervals in the future.

A firm's year ends on December 31. Its tax is computed and submitted to the U.S. Treasury on March 15 of the following year. When should the taxes be reported as a liability?

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. David, a high school math teacher, wants to set up an IRA account into which he will deposit $2,000 per year. He plans to teach for 20 more years and then retire. If the interest on his account is 7% compounded annually, how much will be in his account when he retires?

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

From the following list, identify whether the change in the account balance during the year would be reported as an operating O, an investing I, or a financing F activity or not separately reported on the statement of cash flows N. Assume that the indirect method is used to determine the cash flows from operating activities. -Other accrued liabilities

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

Simple interest on a loan can be calculated by multiplying the principal by the annual interest rate expressed as a percentage of the time in years or a fraction of the time in years.

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2014 balance sheet. -An amount of money owed to the federal government based on the company's annual income.

The liability for a premium offer estimated to be redeemed is not a current liability.