Question 1

Which of the following statements regarding contingencies is true?

Accepted Answer

A)  Contingencies that are not estimable should not be disclosed even if probable. 
B)  Contingent assets, if probable and estimable, are treated in much the same way as contingent liabilities. 
C)  Contingencies that are probable and estimable must be recorded before the outcome of future events. 
D)  The accounting principle that determines whether a contingent asset is recorded is that of materiality. 
A)  Contingencies that are not estimable should not be disclosed even if probable. 
B)  Contingent assets, if probable and estimable, are treated in much the same way as contingent liabilities. 
C)  Contingencies that are probable and estimable must be recorded before the outcome of future events. 
D)  The accounting principle that determines whether a contingent asset is recorded is that of materiality.

Question 2

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.
-Current maturities of long-term debt

Accepted Answer

A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows 
A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows

Question 3

In 2015, Boone, Inc. sold 1,000 carpets for $50 each. The carpets carry a 2-year warranty for repairs. Boone estimates that repair costs will average 2% of the total selling price. What is the amount that would be recorded in the warranty liability account as a result of selling the carpets during 2015?

Accepted Answer

A)  No liability should be recorded until the carpets are returned for repairs. 
B)  $ 20 
C)  $1,000
D $500 
A)  No liability should be recorded until the carpets are returned for repairs. 
B)  $ 20 
C)  $1,000
D $500

Question 4

When a liability is accrued, the account decreased in the transaction is a stockholders' equity account.

Accepted Answer

A) True 
 B)False

Question 5

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.
-Salaries and wages payable

Accepted Answer

A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows 
A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows

Question 6

In 2015, Baloga Heating Company sold 400 water heaters for $350 each. The water heaters carry a 2-year warranty for repairs. Baloga estimates that repair costs will average 2% of the total selling price. How much is recorded in the warranty liability account as a result of selling the water heaters during 2015?

Accepted Answer

A)  $4,200 
B)  $1,400 
C)  $2,800 
D)  no liability should be recorded until the water heaters are brought back for repairs. 
A)  $4,200 
B)  $1,400 
C)  $2,800 
D)  no liability should be recorded until the water heaters are brought back for repairs.

Question 7

Contingent assets may be disclosed in the notes if probable and reasonably estimable.

Accepted Answer

A) True 
 B)False

Question 8

Match each of the following terms related to interest and time value of money calculations to their appropriate definition.
-The concept that indicates that people should prefer to receive an immediate amount at the present time over an equal amount in the future.

Accepted Answer

A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity 
A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity

Question 9

Match each of the following terms related to interest and time value of money calculations to their appropriate definition.
-The amount needed at the present time to be equivalent to a series of payments and interest in the future.

Accepted Answer

A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity 
A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity

Question 10

Match each of the following terms related to interest and time value of money calculations to their appropriate definition.
-The amount that will be accumulated in the future when a series of payments is invested and accrues interest until the future time.

Accepted Answer

A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity 
A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity

Question 11

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.
-Taxes payable

Accepted Answer

A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows 
A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows

Question 12

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. Winston wins the lottery. He wins $20,000 per year to be paid to him for 10 years. The state offers him the choice of a cash settlement now instead of the annual payments for 10 years. If the interest rate is 6%, what is the amount the state will offer for a settlement today?

Accepted Answer

A)  $147,200 
B)  $200,000 
C)  $154,440 
D)  $175,000 
A)  $147,200 
B)  $200,000 
C)  $154,440 
D)  $175,000

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

All of the following statements are true except:

Accepted Answer

A)  Under U.S. GAAP, a contingent item should be recorded as a liability if the loss or outflow is probable and can be reasonably estimated. 
B)  IFRS requires a liability to be recorded as a present value amount. 
C)  The threshold for recording items as liabilities is a lower under U.S. GAAP than under IFRS. 
D)  The threshold for recording items as liabilities is a lower under IFRS than under U.S. GAAP. 
A)  Under U.S. GAAP, a contingent item should be recorded as a liability if the loss or outflow is probable and can be reasonably estimated. 
B)  IFRS requires a liability to be recorded as a present value amount. 
C)  The threshold for recording items as liabilities is a lower under U.S. GAAP than under IFRS. 
D)  The threshold for recording items as liabilities is a lower under IFRS than under U.S. GAAP.

Question 15

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 Garrett has $5,000 per year to invest for 10 years and wants to accumulate $87,745 at the end of that time, he must find an investment that is earning at a rate of

Accepted Answer

A)  6% 
B)  15% 
C)  12% 
D)  11% 
A)  6% 
B)  15% 
C)  12% 
D)  11%

Question 16

The interest earned on the principal amount only is referred to as .

Accepted Answer

The answer of The interest earned on the principal amount...

Question 17

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. Mackie's individual retirement account IRA currently has a balance of $100,000 and is earning 6%. Beginning one year from today, what equal annual amounts can be withdrawn from the IRA for 10 years so that the balance after the tenth withdrawal is zero?

Accepted Answer

A)  $14,237 
B)  $13,587 
C)  $12,950 
D)  $10,000 
A)  $14,237 
B)  $13,587 
C)  $12,950 
D)  $10,000

Question 18

Compound interest is a repeated calculation of the interest on the principal over certain periods of time.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)  1% for 12 periods 
B)  12% for three periods 
C)  3% for 12 periods 
D)  3% for four periods 
A)  1% for 12 periods 
B)  12% for three periods 
C)  3% for 12 periods 
D)  3% for four periods

Question 20

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

Accepted Answer

A) True 
 B)False

Which of the following statements regarding contingencies is true?

When a liability is accrued, the account decreased in the transaction is a stockholders' equity account.

Contingent assets may be disclosed in the notes if probable and reasonably estimable.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The concept that indicates that people should prefer to receive an immediate amount at the present time over an equal amount in the future.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The amount needed at the present time to be equivalent to a series of payments and interest in the future.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The amount that will be accumulated in the future when a series of payments is invested and accrues interest until the future time.

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

All of the following statements are true except:

The interest earned on the principal amount only is referred to as .

Compound interest is a repeated calculation of the interest on the principal over certain periods of time.

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

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International-Financial-Reporting-Standards

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

Which of the following statements regarding contingencies is true?

When a liability is accrued, the account decreased in the transaction is a stockholders' equity account.

Contingent assets may be disclosed in the notes if probable and reasonably estimable.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The concept that indicates that people should prefer to receive an immediate amount at the present time over an equal amount in the future.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The amount needed at the present time to be equivalent to a series of payments and interest in the future.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The amount that will be accumulated in the future when a series of payments is invested and accrues interest until the future time.

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

All of the following statements are true except:

The interest earned on the principal amount only is referred to as .

Compound interest is a repeated calculation of the interest on the principal over certain periods of time.

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

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International-Financial-Reporting-Standards

Filters