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

You are interested in accumulating $10,000 so that you can take a cruise in 3 years.If you trying to solve for the amount that you need to invest each year, earning 6% interest compounded annually, the $10,000 represents:

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

Carrington, Inc.recorded $97,000 in salary expense for January 2016.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 2016?

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. Denise wants to help pay for her niece's college tuition.Her niece will begin college in one year.How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for 4 years, and reduce the account balance to zero at the end of the 4 years?

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.

Which of the following is an example of a contingent liability?

Clarion Inc.issues numerous discount coupons throughout the year.A balance in the Estimated Liability for Coupon Redemption

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

In 2016, Morton Co.sold 100 hot air balloons at $4,000 each.The balloons carry a 5-year warranty for defects.Morton estimates that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $42,000.$11,000 in claims was actually incurred during the year to honor their warranty.What was the balance in the ending estimated warranty liability at the end of the year?

If a company purchases $3,200 worth of inventory with terms of 3/10, n/30 on March 3 and pays March 12, then the amount paid to the seller would be

Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to

A bank loaned York Construction Company $35,000 on a 1-year, 6% note, but deducted the interest in advance.The journal entry made by York to record receipt of the cash would include an

Hanover, Inc. Use the selected data from the comparative financial statements for Hanover, Inc. to answer the questions that follo Hanover, Inc. Balance Sheet Accounts (all accounts have normal balances) (in millions) Dec. 30,2017 Dec. 31,2016 Inventories \ 1,780 \ 1,649 Total current assets \ 9,428 \ 8,625 Liabilities in order of significance: Long-term debt \ 14,465 \ 15,001 Other noncurrent liabilities 4,421 3,148 Deferred income taxes 3,504 3,543 Accounts payable 2,556 2,468 Other current liabilities 2,066 1,738 Accrued salaries and wages 1,538 1,082 Short-term borrowings 1,200 1,126 Accrued advertising expense 793 928 Income taxes payable 658 1,142 ​ ​ -Refer to the account information for Hanover, Inc. ​ Required: (1) Calculate percentage changes in accounts payable and income taxes payable.Give a possible explanation for the changes in these accounts. (2) By how much did Hanover's long-term and short-term borrowings change from 2016 to 2017? Give a possible explanation for the change in debt.What other financial statement would be useful in analyzing the change in borrowings? Why?

Generally, an increase in a current liability results in an increase in the operating activities category of the cash flow statement.

Interest payable on a loan becomes a liability:

A contingent liability is recorded if it is probable and can be reasonably estimated.

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 Shidan has $5,000 to invest and wants to have $10,000 at the end of 9 years, what compounded interest rate must she get on her money (assume annual compounding)?

Curtain Corp.stands to receive a sufficient cash settlement from a law suit.Curtain needs to record this on its accounting records.

All of the following are characteristics of current liabilities except:

Which of the following would appear on the balance sheet as a current liability?