Exam 11: Current Liabilities and Contingencies

Which is true about lines of credit?

Which statement about contingencies is correct?

Explain what contingent assets and liabilities are and how these items are accounted for financial reporting purposes.

Which is not an example of a financial liability?

It is early in February 2017 and you are conducting the audit of Blast Off Airline's 2016 financial statements.Through discussion with Blast Off's Chief Financial Officer you learn of matters that have not yet been incorporated into the 2016 financial statements: In July 2016,127 passengers on board Blast Off Airlines Flight 007 were seriously injured when the plane missed the runway on final approach.In January 2017,the injured passengers launched a class action lawsuit against Blast Off seeking damages of $15 million.Blast Off's internal investigation of the incident determined that the pilot was intoxicated during the flight.The company's solicitors suggest that if the matter goes to court,Blast Off will be found liable and ordered to pay the $15 million. In an attempt to reduce its loss,Blast Off's solicitors made a settlement offer of $10 million to the plaintiffs.The litigants' attorney has not provided a formal response but has indicated that the offer is being seriously considered.Blast Off's lawyers estimate that there is a 90% probability the plaintiffs will accept the offer. Required: Prepare the journal entries to record the required adjustments for the above event.

Which of the following characteristic is required for a liability under IFRS Framework?

Why is it important to distinguish current liabilities from long-term liabilities?

List three characteristics of a franchise arrangement.

Explain the meaning of "provision" and give an example.

Fill in the following chart.

It is early in February 2017 and you are conducting the audit of Blast Off Airline's 2016 financial statements.Through discussion with Blast Off's Chief Financial Officer you learn of matters that have not yet been incorporated into the 2016 financial statements: During 2016,Blast Off began a customer loyalty program.For each aeronautical mile that a passenger travels on a paid flight,the passenger accrues one flight mile.Passengers can redeem accrued flight miles for free air travel.Earned miles do not expire.Blast Off's analysis of its competitors' programs suggests an average redemption rate of 55%.In 2016,Blast Off awarded 50,000,000 flight miles,1,375,000 of which were redeemed.Management estimates the fair value of the flight miles is $540,000. Required: Prepare the journal entries to record the required adjustments for the above event.

Explain the nature of current liabilities and how these are accounted for in the financial statements.

Which is not a current liability?

For the following transaction,provide all of the required journal entries from inception to liquidation.Assume a December 31 year end and that the company does not prepare interim statements.Round all amounts to nearest dollar. Face value of note payable \ 200,000 Date of issue for note May 1,2016 Due date for note May 1,2017 Interest rate in the note 5\% (interest due at maturity) Market rate of interest 5\% Consideration received Cash

A company purchases inventory on credit for $80,000.Inventory costing $30,000 is sold on credit for $40,000.The applicable HST rate is 10%.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable HST rate is 10%.The cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

For each independent situation: 1.Langford Airport Parking Ltd.awards customers 250 reward miles per stay,in a well-known airline mileage program.Langford pays the airline $0.06 for each mile.Langford,which is not an agent for the airline,estimates that the fair value of the miles is the same as the price paid-$0.06.Parking revenues on May 24,2017 were $52,000.Langford awarded 40,000 airline points to its customers. 2.On October 15,2017,Hamilton Windows and Sash properly recorded the issue of a $12,000,7% note due April 15,2018.Hamilton is preparing its financial statements for the year ended December 31,2018.Hamilton does not make adjusting entries during the year. Required: For each of the situations described above,prepare the required journal entry for the underlined entity.If a journal entry is not required,explain why.

RJ Magazines sells two-year magazine subscriptions for $108 cash each.The cost of producing and delivering each monthly magazine is $2.75 paid in cash at the time of delivery.RJ's sales activity for the year follows: Sales activity ∙ On January 1,2017,RJ sells 22,000 subscriptions. ∙ On April 1,2017,RJ sells 5,000 subscriptions. ∙ On November 1,2017,RJ sells 12,000 subscriptions RJ delivers the magazines at the end of the month and the year-end is December 31. Required: a.Prepare journal entries to record the subscription sales during the year. b.Prepare summary journal entries to record the revenue earned during the year and the related expense.

AV Airlines sold a ticket on May 1,2016 for travel on Jun 15,2016 for $1,500.The customer paid at time of booking the flight.Provide the necessary journal entries.

Explain the meaning of the following terms: current assets,trade payables,expected value,deferred revenue and warranty.