Question 1

What are the three broad categories of liabilities?

Accepted Answer

The three broad categories of

Question 2

Which statement about warranties is correct?

Accepted Answer

A)  Warranties sold separately are accounted for under IFRS7. 
B)  Warranties sold separately are accounted for under IFRS15. 
C)  Warranties are financial liabilities and accounted for at fair value. 
D)  Expected value uses a weighted average of possible outcomes. 
A)  Warranties sold separately are accounted for under IFRS7. 
B)  Warranties sold separately are accounted for under IFRS15. 
C)  Warranties are financial liabilities and accounted for at fair value. 
D)  Expected value uses a weighted average of possible outcomes.

Question 3

GOT Jetski Corp.has sold motorized watercraft for a number of years.GOT includes a three-year warranty on each watercraft they sell.Management estimates that the cost of providing the warranty coverage is 2% of sales in the first year and 3% of sales in each of years two and three.Other facts follow:
• GGT reported a $270,000 provision for warranty payable on its December 31,2017 balance sheet.
• GGT's sales for 2018 totalled $6,000,000 spread evenly through the year.
• The cost to GGT of meeting their warranty claims in 2018 was $480,000; $300,000 for parts and $180,000 for labour.
• GGT's sales for 2019 totalled $6,200,000 spread evenly through the year.
• The cost to GGT of meeting their warranty claims in 2019 was $468,000; $280,800 for parts and $187,200 for labour.Based on recent claims history,GGT revises their 2019 warranty provision to 9% of sales.
Required:
a.Prepare summary journal entries to record warranty expense and warranty claims in 2018 and 2019.
b.Determine the provision for warranty payable that GGT will report as a liability on December 31,2019.

Accepted Answer

To recognize the provision in 2018
a.
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Question 4

On January 1,2017 BCL Transmission Services Co.issued a $40,000,non-interest bearing note,due on January 1,2018,in exchange for a custom-built computer system.The fair value of the computer system is not easily determinable.The market rate of interest for similar transactions is 4%.BCL's year-end is December 31.
Required:
a.Prepare the journal entry to record the issuance of the note payable.
b.Prepare the journal entry to record the accrual of interest at December 31,2017,assuming that BCL prepares adjusting entries only at year-end.
c.Prepare the journal entry to record the retirement of the note payable on January 1,2018.

Accepted Answer

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Question 5

Which of the following is true about non-interest bearing notes?

Accepted Answer

A)  The most common method of determining the fair value of non-interest bearing notes is the discounted cash flow analysis. 
B)  Non-interest bearing short-term payables may never be measured at the original invoice amount. 
C)  A rule of thumb is to use the face value for non-interest bearing notes payable with a duration of greater than 90 days. 
D)  A rule of thumb is to use the market value for non-interest bearing notes payable with a duration of 90 days or less. 
A)  The most common method of determining the fair value of non-interest bearing notes is the discounted cash flow analysis. 
B)  Non-interest bearing short-term payables may never be measured at the original invoice amount. 
C)  A rule of thumb is to use the face value for non-interest bearing notes payable with a duration of greater than 90 days. 
D)  A rule of thumb is to use the market value for non-interest bearing notes payable with a duration of 90 days or less.

Question 6

Which is a reason to use the net method to record purchase discounts?

Accepted Answer

A)  Cost-benefit factor is greater for the net method. 
B)  Reporting "purchase discounts lost" signifies inefficient business practices. 
C)  Given the materiality of the amounts involved, the net method is used. 
D)  The net method is technically superior to the gross method. 
A)  Cost-benefit factor is greater for the net method. 
B)  Reporting "purchase discounts lost" signifies inefficient business practices. 
C)  Given the materiality of the amounts involved, the net method is used. 
D)  The net method is technically superior to the gross method.

Question 7

Why are taxes payable not classified as financial liabilities?

Accepted Answer

The obligations to pay taxes a

Question 8

Fill in the following chart.

Accepted Answer

@#IMG-DLM&_TB1321_00

Question 9

Which statement regarding liabilities is not correct under the IFRS Framework?

Accepted Answer

A)  A reliable estimate for an asset is presumed to exist. 
B)  A provision exists if the timing of payment is uncertain. 
C)  A provision exists if the amount of payment is uncertain. 
D)  A reliable estimate for a liability is presumed to exist. 
A)  A reliable estimate for an asset is presumed to exist. 
B)  A provision exists if the timing of payment is uncertain. 
C)  A provision exists if the amount of payment is uncertain. 
D)  A reliable estimate for a liability is presumed to exist.

Question 10

Sales made in fiscal 2016 for $50,000,000 include a 5 year warranty coverage.The estimated cost for warranty is expected to be 2% for the first 4 years and 5% for the last year.Determine how much warranty expense will be recorded in fiscal 2016.

Accepted Answer

A)  1,000,000 
B)  4,000,000 
C)  5,000,000 
D)  6,500,000 
A)  1,000,000 
B)  4,000,000 
C)  5,000,000 
D)  6,500,000

Question 11

Contrast the gross method with the net method of recording purchase discounts by completing the following table:

Accepted Answer

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Question 12

Which statement is correct?

Accepted Answer

A)  Contingencies arise from future events. 
B)  Financial guarantees arise from contracts previously entered into. 
C)  Current liabilities arise from future events. 
D)  The amount to be paid for financial guarantees is known or reasonably estimable. 
A)  Contingencies arise from future events. 
B)  Financial guarantees arise from contracts previously entered into. 
C)  Current liabilities arise from future events. 
D)  The amount to be paid for financial guarantees is known or reasonably estimable.

Question 13

Which is true about lines of credit?

Accepted Answer

A)  The company generally must repay the credit line in full monthly. 
B)  The borrower can borrow up to an agreed upon limit. 
C)  Interest is charged on the full amount of the agreed upon limit. 
D)  Lines of credit are particularly useful for steady income businesses that have very little volatility in revenue. 
A)  The company generally must repay the credit line in full monthly. 
B)  The borrower can borrow up to an agreed upon limit. 
C)  Interest is charged on the full amount of the agreed upon limit. 
D)  Lines of credit are particularly useful for steady income businesses that have very little volatility in revenue.

Question 14

Which is a non-current liability?

Accepted Answer

A)  HST payable. 
B)  45-day accounts payable. 
C)  Five-year loan that matures four months after year-end reporting date. 
D)  The creditor has granted a 15-month grace period on a loan in default. 
A)  HST payable. 
B)  45-day accounts payable. 
C)  Five-year loan that matures four months after year-end reporting date. 
D)  The creditor has granted a 15-month grace period on a loan in default.

Question 15

Fill in the following chart.

Accepted Answer

@#IMG-DLM&_TB1321_00

Question 16

List three characteristics of a franchise arrangement.

Accepted Answer

A franchise arrangement is one in which:

Question 17

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.

Accepted Answer

Issuance
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Question 18

Which of the following is correct about a "liability" under IFRS Framework?

Accepted Answer

A)  A future obligation arising from past events, the settlement of which is expected to result in an inflow of resources. 
B)  A present obligation arising from past events, the settlement of which is expected to result in an inflow of resources. 
C)  A past obligation arising from past events, the settlement of which is expected to result in an outflow of resources. 
D)  A present obligation arising from past events, the settlement of which is expected to result in an outflow of resources. 
A)  A future obligation arising from past events, the settlement of which is expected to result in an inflow of resources. 
B)  A present obligation arising from past events, the settlement of which is expected to result in an inflow of resources. 
C)  A past obligation arising from past events, the settlement of which is expected to result in an outflow of resources. 
D)  A present obligation arising from past events, the settlement of which is expected to result in an outflow of resources.

Question 19

Which statement about contingencies is correct?

Accepted Answer

A)  If the future outcome is remote but reliably measurable, a provision is recorded. 
B)  If the future outcome is remote, but not reliably measurable, disclosure is required. 
C)  If the future outcome is remote, but not reliably measurable, no action is required. 
D)  If the future outcome is remote, but reliably measurable, disclosure is required. 
A)  If the future outcome is remote but reliably measurable, a provision is recorded. 
B)  If the future outcome is remote, but not reliably measurable, disclosure is required. 
C)  If the future outcome is remote, but not reliably measurable, no action is required. 
D)  If the future outcome is remote, but reliably measurable, disclosure is required.

Question 20

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Accepted Answer

financial guarantee contract: A contract

What are the three broad categories of liabilities?

Which statement about warranties is correct?

Which of the following is true about non-interest bearing notes?

Which is a reason to use the net method to record purchase discounts?

Why are taxes payable not classified as financial liabilities?

Fill in the following chart.

Which statement regarding liabilities is not correct under the IFRS Framework?

Sales made in fiscal 2016 for $50,000,000 include a 5 year warranty coverage.The estimated cost for warranty is expected to be 2% for the first 4 years and 5% for the last year.Determine how much warranty expense will be recorded in fiscal 2016.

Contrast the gross method with the net method of recording purchase discounts by completing the following table:

Which statement is correct?

Which is true about lines of credit?

Which is a non-current liability?

Fill in the following chart.

List three characteristics of a franchise arrangement.

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.

Which of the following is correct about a "liability" under IFRS Framework?

Which statement about contingencies is correct?

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Accounting Changes

Filters

Exam 1: Current Liabilities and Contingencies

What are the three broad categories of liabilities?

Which statement about warranties is correct?

Which of the following is true about non-interest bearing notes?

Which is a reason to use the net method to record purchase discounts?

Why are taxes payable not classified as financial liabilities?

Fill in the following chart.

Which statement regarding liabilities is not correct under the IFRS Framework?

Sales made in fiscal 2016 for $50,000,000 include a 5 year warranty coverage.The estimated cost for warranty is expected to be 2% for the first 4 years and 5% for the last year.Determine how much warranty expense will be recorded in fiscal 2016.

Contrast the gross method with the net method of recording purchase discounts by completing the following table:

Which statement is correct?

Which is true about lines of credit?

Which is a non-current liability?

Fill in the following chart.

List three characteristics of a franchise arrangement.

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.

Which of the following is correct about a "liability" under IFRS Framework?

Which statement about contingencies is correct?

Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Accounting for Income Taxes

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Accounting Changes

Filters