Exam 9: Reporting and Analysing Liabilities

Vagabond Ltd manufactures handbags and provides a six-month quality warranty. The provision for warranty account has a credit balance of $50,000 and the estimated future obligations for warranty work is $190,000. The adjustment necessary to update the provision account is a:

A quick ratio is a measure of an entity's:

On 1 October, Simon's Solar Service borrows $150,000 from Statewide Bank on a 3 month, 4% note. -The entry by Simon's Solar Service to record payment of the note and accrued interest on 1 January is:

A current liability is an obligation that can reasonably be expected to be paid within the operating cycle of a business.

An employer business is required by law to withhold tax from an employee's gross pay and remit it to the taxation authority (the ATO).

Match the descriptions with their terms: -A liability for which the amount is uncertain but able to be measured reliably by estimation

In Australia the taxation authority is the Australian Securities and Investments Commission (ASIC).

Century Ltd has outstanding debentures with a face value of $50,000. If Century redeems the debentures for $55,000 it must record:

Although interest expense reduces net profit, earnings per share is often higher under debt financing because no additional shares have been issued.

Bondi Bank agrees to lend Tawonga Construction Company Ltd $200,000 on 1 January. Tawonga Construction Company Ltd signs a $200,000, 4%, 9-month note. -The entry made by Tawonga Construction Company Ltd on 1 January to record the proceeds and issue of the note is:

The following information is available from the annual reports of 2 clothing retailers Required: (a) Based on the preceding information, compute the following ratios for each company: 1. liabilities to total assets 2. times interest earned. (b) What conclusion concerning the companies' long-run solvency can be drawn from these ratios?

Notes payable, accounts payable, revenue received in advance and accrued liabilities are all examples of non-current liabilities.

A loan secured by a charge over a property is also known as a:

March Ltd had cash sales of $44,000 for the month of June. Sales are subject to 10% goods and services tax (GST). Prepare the entry to record the sale.

Warranty obligations are classified as provisions because the:

The face value of a note is also the principal amount due at maturity of the note.

On 1 January 2019 Bradley Ltd, a calendar-year company, issued $200,000 of notes payable of which $50,000 is due on 1 January for each of the next four years. The proper statement of financial position for presentation on 31 December 2019 is:

Bondi Bank agrees to lend Tawonga Construction Company Ltd $200,000 on 1 January. Tawonga Construction Company Ltd signs a $200,000, 4%, 9-month note. -What entry will Tawonga Construction Company Ltd make to pay off the note and interest at maturity?

Match the descriptions with their terms: -A loan that is secured by a charge over property

Complete the following statements: -The ______________ ratio is a measure of a company's immediate short-term liquidity.