Question 1

If an event may become an actual liability in the future, it is called a

Accepted Answer

A) potential liability. 
B) hypothetical liability. 
C) probabilistic liability. 
D) contingent liability. 
A) potential liability. 
B) hypothetical liability. 
C) probabilistic liability. 
D) contingent liability.

Question 2

A finance lease requires the lessee to record the lease as a purchase of an asset.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements concerning leases is true?

Accepted Answer

A) Finance leases are favored by lessees. 
B) The appearance of the account, Leased Asset, on the statement of financial position, signifies an operating lease. 
C) The portion of a lease liability expected to be paid in the next year is reported as a current liability. 
D) Present value is irrelevant in accounting for leases. 
A) Finance leases are favored by lessees. 
B) The appearance of the account, Leased Asset, on the statement of financial position, signifies an operating lease. 
C) The portion of a lease liability expected to be paid in the next year is reported as a current liability. 
D) Present value is irrelevant in accounting for leases.

Question 4

Larson Company has thirty employees who each earn $120 per day.If they accumulate vacation time at the rate of 1.5 vacation days for each month worked, the amount of vacation benefits that should be accrued at the end of the month is

Accepted Answer

A) $360. 
B) $3,600. 
C) $5,400. 
D) $540. 
A) $360. 
B) $3,600. 
C) $5,400. 
D) $540.

Question 5

Postretirement benefits are accounted for on a cash basis.

Accepted Answer

A) True 
 B)False

Question 6

The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

Accepted Answer

A) when the product is brought in for repairs. 
B) in the period in which the product was sold. 
C) at the end of the warranty period. 
D) only if the repairs are expected to be made within one year. 
A) when the product is brought in for repairs. 
B) in the period in which the product was sold. 
C) at the end of the warranty period. 
D) only if the repairs are expected to be made within one year.

Question 7

Which of the following is not a condition which would require the recording of a lease contract as a finance lease?

Accepted Answer

A) The lease transfers ownership of the property to the lessee. 
B) The lease contains a bargain purchase option. 
C) The lease term is a minor portion of the economic life of the leased property. 
D) The present value of the lease payments represents substantially all of the fair value of the leased property. 
A) The lease transfers ownership of the property to the lessee. 
B) The lease contains a bargain purchase option. 
C) The lease term is a minor portion of the economic life of the leased property. 
D) The present value of the lease payments represents substantially all of the fair value of the leased property.

Question 8

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 should Marin Company report as Warranty Expense in its 2011 income statement?

Accepted Answer

A) $6,000. 
B) $4,000. 
C) $2,000. 
D) $30,000. 
A) $6,000. 
B) $4,000. 
C) $2,000. 
D) $30,000.

Question 9

When vacation benefits are paid, Vacation Benefits Expense is debited.

Accepted Answer

A) True 
 B)False

Question 10

In a finance lease, the amount capitalized is the

Accepted Answer

A) sum of the lease payments over the life of the lease. 
B) fair value of the leased asset on the date the lease is signed. 
C) present value of the lease payments. 
D) future value of the asset as of the lease termination date. 
A) sum of the lease payments over the life of the lease. 
B) fair value of the leased asset on the date the lease is signed. 
C) present value of the lease payments. 
D) future value of the asset as of the lease termination date.

Question 11

The renting of an apartment is an example of a finance lease.

Accepted Answer

A) True 
 B)False

If an event may become an actual liability in the future, it is called a

A finance lease requires the lessee to record the lease as a purchase of an asset.

Which of the following statements concerning leases is true?

Larson Company has thirty employees who each earn $120 per day.If they accumulate vacation time at the rate of 1.5 vacation days for each month worked, the amount of vacation benefits that should be accrued at the end of the month is

Postretirement benefits are accounted for on a cash basis.

The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

Which of the following is not a condition which would require the recording of a lease contract as a finance lease?

When vacation benefits are paid, Vacation Benefits Expense is debited.

In a finance lease, the amount capitalized is the

The renting of an apartment is an example of a finance lease.

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 may become an actual liability in the future, it is called a

A finance lease requires the lessee to record the lease as a purchase of an asset.

Which of the following statements concerning leases is true?

Larson Company has thirty employees who each earn $120 per day.If they accumulate vacation time at the rate of 1.5 vacation days for each month worked, the amount of vacation benefits that should be accrued at the end of the month is

Postretirement benefits are accounted for on a cash basis.

The accounting for warranty cost is based on the expense recognition principle, which requires that the estimated cost of honoring warranty contracts should be recognized as an expense

Which of the following is not a condition which would require the recording of a lease contract as a finance lease?

When vacation benefits are paid, Vacation Benefits Expense is debited.

In a finance lease, the amount capitalized is the

The renting of an apartment is an example of a finance lease.

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