Question 1

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

Accepted Answer

A) True 
 B)False  False

Question 2

The accounting for warranty costs is based on the

Accepted Answer

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

Question 3

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. B

Question 4

If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur, the contingent liability

Accepted Answer

A) should be recorded in the accounts. 
B) should be disclosed in the notes accompanying 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 accompanying 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.

Question 5

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 6

Postretirement benefits are accounted for on a cash basis.

Accepted Answer

A) True 
 B)False

Question 7

A contingency 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 8

Marin Company sells 9,000 units of its product in 2021 for $500 each.The selling price includes a one-year warranty on parts.It is expected that 3% of the units will 1.What amount should Marin Company report as Warranty Expense in its 2021 income statement?

Accepted Answer

A) $4,500. 
B) $9,000. 
C) $13,500. 
D) $67,500. 
A) $4,500. 
B) $9,000. 
C) $13,500. 
D) $67,500.

Question 9

Larson Company has 20 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) $240. 
B) $2,400. 
C) $3,600. 
D) $360. 
A) $240. 
B) $2,400. 
C) $3,600. 
D) $360.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

If a liability is dependent on a future event, 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 14

A contingent liability is a liability that may be incurred if some future event takes place.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

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

Question 17

Marin Company sells 9,000 units of its product in 2021 for $500 each.The selling price includes a one-year warranty on parts.It is expected that 3% of the units will 1.and that repair costs will average $50 per unit.In the year of the sale, warranty contracts
Are honored on 180 units for a total cost of $9,000.
What amount will be reported on Marin Company's balance sheet as Warranty Liability on December 31, 2021?

Accepted Answer

A) $9,000. 
B) $13,500. 
C) $4,500. 
D) Cannot be determined. 
A) $9,000. 
B) $13,500. 
C) $4,500. 
D) Cannot be determined.

Question 18

Disclosure of a contingent liability is usually made

Accepted Answer

A) parenthetically, in the body of the balance sheet. 
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 balance sheet. 
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 19

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 20

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.

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

The accounting for warranty costs is based on the

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

If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur, the contingent liability

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

Postretirement benefits are accounted for on a cash basis.

A contingency that is remote

Marin Company sells 9,000 units of its product in 2021 for $500 each.The selling price includes a one-year warranty on parts.It is expected that 3% of the units will 1.What amount should Marin Company report as Warranty Expense in its 2021 income statement?

Larson Company has 20 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

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

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

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

If a liability is dependent on a future event, it is called a

A contingent liability is a liability that may be incurred if some future event takes place.

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

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

Disclosure of a contingent liability is usually made

Warranty expenses are reported on the income statement as

Postretirement benefits consist of payments by employers to retired employees for

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: Organisations, Stock Transactions and Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Time Value of Money

Payroll Accounting

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Exam 16: Other Significant Liabilities

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

The accounting for warranty costs is based on the

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

If a contingent liability is reasonably estimable and it is reasonably possible that the contingency will occur, the contingent liability

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

Postretirement benefits are accounted for on a cash basis.

A contingency that is remote

Marin Company sells 9,000 units of its product in 2021 for $500 each.The selling price includes a one-year warranty on parts.It is expected that 3% of the units will 1.What amount should Marin Company report as Warranty Expense in its 2021 income statement?

Larson Company has 20 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

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

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

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

If a liability is dependent on a future event, it is called a

A contingent liability is a liability that may be incurred if some future event takes place.

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

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

Disclosure of a contingent liability is usually made

Warranty expenses are reported on the income statement as

Postretirement benefits consist of payments by employers to retired employees for

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: Organisations, Stock Transactions and Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Time Value of Money

Payroll Accounting

Filters