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

Carrington, Inc. recorded $97,000 in salary expense for January, 2015. Its beginning balance in salaries payable was $3,000 and its ending balance was $4,000. How much was paid in cash for salaries during January, 2015?

If your bank gives you a $2,000 loan at 8% per year, but deducts the interest in advance, is 8% the "real" rate of interest that you will pay?

The difference between notes payable and accounts payable is .

The terms referring to contingencies differ between U.S. GAAP and IFRS.

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. Barton Company has just purchased a machine with a cost of $100,000, and signed a note agreeing to pay the manufacturer equal annual amounts of $17,400. If the current rate of interest is 8%, how many equal annual payments will be made?

Estimated liability for product warranties to be paid in the future is a current liability.

Assume the current ratio is 3 to 4. Purchases of inventory on account would cause the current ratio to

Which of the following statements about current liabilities is true?

Which of the following is an example of a contingent 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. How much would have to be deposited in a savings account earning 6%, so that equal annual withdrawals of $200 can be made at the end of each of 10 years? The balance at the end of the last year would be zero.

For users of financial statements, the current liability classification in the balance sheet is important because it is most closely tied to the concept of profitability.

What is the correct classification of the account: Discount on Notes Payable?

For a given contingent liability, the company has the choice of either recording it on the balance sheet or disclosing it in the notes.

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

An invoice received from a supplier for $8,000 on January 1 with terms 1/15, n/30 means that the company should pay

An obligation that involves an existing condition for which the outcome is not known with certainty and depends on some event that will occur in the future is call an .

On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a 1-year, 6% note. If the company keeps its records on a calendar year, an adjustment is needed on December 31 to increase

Dallas Company uses the indirect method of preparing the statement of cash flows and has the following current liabilities at the beginning of the period: Accounts Payable, $35,000; Taxes Payable, $15,000. At the end of the period, the balances of the account are as follows: Accounts Payable, $25,000; Taxes Payable, $20,000. What amounts will appear in the cash flow statement? In what category of the statement will they appear?

Discount on Notes Payable is treated as a reduction of notes payable on the balance sheet.

Match each of the following terms pertaining to liabilities to their definitions. -Accounts that will be satisfied within one year or the next operating cycle.