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

A cereal company includes one premium coupon in every cereal box.Upon returning 10 such coupons to the company, a customer will be sent a free cereal bowl.In a recent year, the company sold 200,000 boxes of cereal for $1 a box.It is estimated that 20% of the coupons will be returned.If the cereal bowls cost the company $3 each, what amount of liability for premium redemptions must be recorded by the company?

Which of the following statements regarding the inclusion of liabilities on the statement of cash flows is true?

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

There are some liabilities, such as income tax payable, for which the amounts must be estimated.Failure to estimate these amounts and record them would be a violation of the

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

A company's weekly payroll amounts to $50,000 and payday for the week is every Friday.Employees work five days per week, Monday through Friday.The appropriate journal entry was recorded at the end of the accounting period, Monday, March 31, 2016.What amount is wages expense for April for the payday, Friday, April, 4, 2016?

What type of interest is calculated on the balance of the principal only?

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

Terms of 2/10, n30 mean that if the discount is not taken, full payment is due within ___________________________ days.

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2016 balance sheet. -Estimated warranty payable by June 30, 2017.

When a bank deducts the interest on a note in advance, the note has been ____________________.

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?

Which of the following statements about current liabilities is true?

Income taxes payable is a current liability.

Employees earn $6,000 per day, work five days per week, Monday through Friday, and get paid every Friday.If the previous payday was January 26 and the accounting period ends on January 31, what amount is the ending balance in the wages payable account?

If current assets amount to $150, total assets $350, current liabilities $65, and total liabilities $100, then the current ratio is

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2016 balance sheet. -An amount of money owed in 2017 to a creditor as an annual installment payment on a ten-year note, due June 30, 2022.

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

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. ​ For a given single sum invested at 8% for 4 years, how will the future value be affected if the compounding period is changed from quarterly to annually?

The issue price of a bond is based on the _____________________ of the cash flows that the bond will produce.