Question 1

If an event makes it probable that a company will experience a cash outflow but it cannot reasonably estimate the amount, the contingent liability

Accepted Answer

A) should be recorded in the accounts. 
B) should be disclosed in the notes to the financial statements. 
C) should not be recorded or disclosed in the notes until the contingency actually happens. 
D) must be paid for the amount estimated. 
A) should be recorded in the accounts. 
B) should be disclosed in the notes to the financial statements. 
C) should not be recorded or disclosed in the notes until the contingency actually happens. 
D) must be paid for the amount estimated. B

Question 2

Postretirement benefits consist of payments by employers to retired employees for

Accepted Answer

A) health care and life insurance only. 
B) health care and pensions only. 
C) life insurance and pensions only. 
D) health care, life insurance, and pensions. 
A) health care and life insurance only. 
B) health care and pensions only. 
C) life insurance and pensions only. 
D) health care, life insurance, and pensions. D

Question 3

In a defined-contribution plan, an employer only recognizes pension expense for the amount that the employer is required to contribute under the plan.

Accepted Answer

A) True 
 B)False  True

Question 4

Repair costs incurred in honoring warranty contracts should be debited to Estimated Warranty Liability.

Accepted Answer

A) True 
 B)False

Question 5

A contingency liability that is remote

Accepted Answer

A) should be disclosed in the financial statements. 
B) must be accrued as a loss. 
C) does not need to be disclosed. 
D) is recorded as a contingent liability. 
A) should be disclosed in the financial statements. 
B) must be accrued as a loss. 
C) does not need to be disclosed. 
D) is recorded as a contingent liability.

Question 6

Warranty expenses are reported on the income statement as

Accepted Answer

A) administrative expenses. 
B) part of cost of goods sold. 
C) contra-revenues. 
D) selling expenses. 
A) administrative expenses. 
B) part of cost of goods sold. 
C) contra-revenues. 
D) selling expenses.

Question 7

Match the items below by entering the appropriate code letter in the space provided.

Accepted Answer

The answer of Match the items below by entering the...

Question 8

In a lease contract,

Accepted Answer

A) the owner of the property is called the lessee. 
B) the presence of a bargain purchase option indicates that it is a finance lease. 
C) the renter of the property is called the lessor. 
D) there is always a transfer of ownership at the end of the lease term. 
A) the owner of the property is called the lessee. 
B) the presence of a bargain purchase option indicates that it is a finance lease. 
C) the renter of the property is called the lessor. 
D) there is always a transfer of ownership at the end of the lease term.

Question 9

An operating lease transfers substantially all the benefits and risks of ownership to the lessee.

Accepted Answer

A) True 
 B)False

Question 10

A lease where the intent is temporary use of the property by the lessee with continued ownership of the property by the lessor is called

Accepted Answer

A) off-balance sheet financing. 
B) an operating lease. 
C) a finance lease. 
D) a purchase of property. 
A) off-balance sheet financing. 
B) an operating lease. 
C) a finance lease. 
D) a purchase of property.

Question 11

If the present value of lease payments represents substantially all of the fair value of the leased property, the

Accepted Answer

A) conditions are met for the lease to be considered a finance lease. 
B) lease is uneconomical and should not be entered into. 
C) lease may be classified as an operating lease. 
D) recording of a lease liability is optional-that is, the off-balance-sheet approach can be elected. 
A) conditions are met for the lease to be considered a finance lease. 
B) lease is uneconomical and should not be entered into. 
C) lease may be classified as an operating lease. 
D) recording of a lease liability is optional-that is, the off-balance-sheet approach can be elected.

Question 12

The accounting for warranty costs is based on the

Accepted Answer

A) going concern principle. 
B) expense recognition principle. 
C) conservatism principle. 
D) objectivity principle. 
A) going concern principle. 
B) expense recognition principle. 
C) conservatism principle. 
D) objectivity principle.

Question 13

An employer's estimated cost for postretirement benefits for its employees should be

Accepted Answer

A) recognized as an expense when paid. 
B) recognized as an expense during the employees' work years. 
C) recognized as an expense during the employees' retirement years. 
D) charged to the goodwill account because providing employees with benefits generates employee goodwill. 
A) recognized as an expense when paid. 
B) recognized as an expense during the employees' work years. 
C) recognized as an expense during the employees' retirement years. 
D) charged to the goodwill account because providing employees with benefits generates employee goodwill.

Question 14

The paid absence that is most commonly accrued is

Accepted Answer

A) voting leave. 
B) vacation time. 
C) maternity leave. 
D) disability leave. 
A) voting leave. 
B) vacation time. 
C) maternity leave. 
D) disability leave.

Question 15

Marin Company sells 4,000 units of its product in 2011 for $500 each.The selling price includes a one-year warranty on parts.It is expected that 3% of the units will be defective and that repair costs will average $50 per unit.In the year of sale, warranty contracts are honored on 80 units for a total cost of $4,000. What amount will be reported on Marin Company's statement of financial position as Estimated Warranty Liability on December 31, 2011?

Accepted Answer

A) $4,000. 
B) $6,000. 
C) $2,000. 
D) Cannot be determined. 
A) $4,000. 
B) $6,000. 
C) $2,000. 
D) Cannot be determined.

Question 16

Disclosure of a contingent liability is usually made

Accepted Answer

A) parenthetically, in the body of the statement of financial position. 
B) parenthetically, in the body of the income statement. 
C) in a note to the financial statements. 
D) in the management discussion section of the financial statements. 
A) parenthetically, in the body of the statement of financial position. 
B) parenthetically, in the body of the income statement. 
C) in a note to the financial statements. 
D) in the management discussion section of the financial statements.

Question 17

Contingent liabilities should be recorded in the accounts if there is a remote possibility that the contingency will actually occur.

Accepted Answer

A) True 
 B)False

Question 18

In concept, estimating Warranty Expense when products are sold with a warranty is similar to estimating Bad Debts Expense based on credit sales.

Accepted Answer

A) True 
 B)False

Question 19

A provision is a liability of uncertain timing or amount.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement note?

Accepted Answer

A) The nature of the item 
B) The expected outcome of the future event 
C) A numerical probability of the expected loss 
D) The amount of the contingency, if known 
A) The nature of the item 
B) The expected outcome of the future event 
C) A numerical probability of the expected loss 
D) The amount of the contingency, if known

If an event makes it probable that a company will experience a cash outflow but it cannot reasonably estimate the amount, the contingent liability

Postretirement benefits consist of payments by employers to retired employees for

In a defined-contribution plan, an employer only recognizes pension expense for the amount that the employer is required to contribute under the plan.

Repair costs incurred in honoring warranty contracts should be debited to Estimated Warranty Liability.

A contingency liability that is remote

Warranty expenses are reported on the income statement as

Match the items below by entering the appropriate code letter in the space provided.

In a lease contract,

An operating lease transfers substantially all the benefits and risks of ownership to the lessee.

A lease where the intent is temporary use of the property by the lessee with continued ownership of the property by the lessor is called

If the present value of lease payments represents substantially all of the fair value of the leased property, the

The accounting for warranty costs is based on the

An employer's estimated cost for postretirement benefits for its employees should be

The paid absence that is most commonly accrued is

Disclosure of a contingent liability is usually made

Contingent liabilities should be recorded in the accounts if there is a remote possibility that the contingency will actually occur.

In concept, estimating Warranty Expense when products are sold with a warranty is similar to estimating Bad Debts Expense based on credit sales.

A provision is a liability of uncertain timing or amount.

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement note?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Payroll Accounting

Filters

Exam 16: Other Significant Liabilities

If an event makes it probable that a company will experience a cash outflow but it cannot reasonably estimate the amount, the contingent liability

Postretirement benefits consist of payments by employers to retired employees for

In a defined-contribution plan, an employer only recognizes pension expense for the amount that the employer is required to contribute under the plan.

Repair costs incurred in honoring warranty contracts should be debited to Estimated Warranty Liability.

A contingency liability that is remote

Warranty expenses are reported on the income statement as

Match the items below by entering the appropriate code letter in the space provided.

In a lease contract,

An operating lease transfers substantially all the benefits and risks of ownership to the lessee.

A lease where the intent is temporary use of the property by the lessee with continued ownership of the property by the lessor is called

If the present value of lease payments represents substantially all of the fair value of the leased property, the

The accounting for warranty costs is based on the

An employer's estimated cost for postretirement benefits for its employees should be

The paid absence that is most commonly accrued is

Disclosure of a contingent liability is usually made

Contingent liabilities should be recorded in the accounts if there is a remote possibility that the contingency will actually occur.

In concept, estimating Warranty Expense when products are sold with a warranty is similar to estimating Bad Debts Expense based on credit sales.

A provision is a liability of uncertain timing or amount.

Which of the following items would not be identified if a contingent liability were disclosed in a financial statement note?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Share Transactions, Dividends,and Retained Earnings

Investments

Statement of Cash Flows

Financial Statement Analysis

Payroll Accounting

Filters