Question 1

Explain what rebates are and how they are accounted for in the financial statements.

Accepted Answer

A common form of rebate requires buyers

Question 2

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.

Accepted Answer

To allocate a portion of the ticket sale

Question 3

P.A.Whitehorse owns a successful gardening company called Valley Gardening Ltd.(Valley).The company,which has a year-end of December 31,2015,has asked you,the company accountant,to prepare a report outlining how the following items should be reported in its financial statements.
A.On January 1,2015,Valley took advantage of a vendor-provided financing offer to acquire computer equipment.Valley signed a $30,000 note payable in full on January 1,2017.Interest is payable annually at a rate of 4% per annum.Valley's bank previously advised that it would charge an interest rate of 8% per annum for a loan on similar terms.
B.A client of Valley was injured when she tripped on a piece of Valley's equipment that was in her yard.The injured party is suing Valley for $500,000 for pain and suffering and loss of income.Valley's solicitors advise that the company will almost certainly be found liable.Based on previous verdicts,counsel estimates that there is a 50% probability that the courts will award $400,000,and a 50% probability that the judgment will be $200,000.
C.Valley has guaranteed $100,000 of the indebtedness of Healthyway Inc.(HWI),a related corporation.HWI has a long record of profitability and the probability of default is thought to be remote.
D.Valley's loan agreement with the bank includes a covenant that Valley will maintain its current ratio of no less than 1.30:1.If Valley fails to meet this or any of the other covenants at year-end,all loan facilities become immediately due and payable.It appears that Valley's current ratio at year-end will be slightly less than this.
Required:
Prepare the report.

Accepted Answer

A.The liability to the vendor will be re

Question 4

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

Accepted Answer

Current liabilities are obligations that

Question 5

Which statement is correct?

Accepted Answer

A)  Contingencies arise from future events. 
B)  The amount to be paid for contingencies is known or reasonably estimable. 
C)  Current liabilities arise from future events. 
D)  The amount to be paid for current liabilities is known or reasonably estimable. 
A)  Contingencies arise from future events. 
B)  The amount to be paid for contingencies is known or reasonably estimable. 
C)  Current liabilities arise from future events. 
D)  The amount to be paid for current liabilities is known or reasonably estimable.

Question 6

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

Accepted Answer

A provision is a liability for which the

Question 7

Which of the following groups includes only financial liabilities?

Accepted Answer

A)  Accounts payable, Notes payable, Warranties payable. 
B)  Bank loan, Bonds payable, Finance lease obligation. 
C)  Accounts payable, HST payable, Bonds payable. 
D)  Bank overdraft, USD bank loan, Obligation under customer loyalty plan. 
A)  Accounts payable, Notes payable, Warranties payable. 
B)  Bank loan, Bonds payable, Finance lease obligation. 
C)  Accounts payable, HST payable, Bonds payable. 
D)  Bank overdraft, USD bank loan, Obligation under customer loyalty plan.

Question 8

Which of the following is true?

Accepted Answer

A)  The declaration of a stock dividend gives rise to a liability. 
B)  Stock dividends are revocable by the board of directors at any time before they are issued. 
C)  Undeclared dividends in arrears on cumulative preferred shares are recorded as a liability. 
D)  No note disclosure is required for the declaration of a stock split. 
A)  The declaration of a stock dividend gives rise to a liability. 
B)  Stock dividends are revocable by the board of directors at any time before they are issued. 
C)  Undeclared dividends in arrears on cumulative preferred shares are recorded as a liability. 
D)  No note disclosure is required for the declaration of a stock split.

Question 9

Which statement is correct about financial and non-financial liabilities?

Accepted Answer

A)  A non-financial liability is a contractual obligation to deliver cash to another party. 
B)  A non-financial liability does not meet all of the criteria for a "liability." 
C)  The two liabilities may be valued differently for financial reporting purposes. 
D)  A non-financial liability is measured at fair value rather than amortized cost. 
A)  A non-financial liability is a contractual obligation to deliver cash to another party. 
B)  A non-financial liability does not meet all of the criteria for a "liability." 
C)  The two liabilities may be valued differently for financial reporting purposes. 
D)  A non-financial liability is measured at fair value rather than amortized cost.

Question 10

Which statement about deferred revenue is correct?

Accepted Answer

A)  Deferred revenue is always a non-current liability. 
B)  Deferred revenue could arise from loyalty programs. 
C)  Deferred revenue is measured using expected values. 
D)  Deferred revenue arises when the goods are shipped. 
A)  Deferred revenue is always a non-current liability. 
B)  Deferred revenue could arise from loyalty programs. 
C)  Deferred revenue is measured using expected values. 
D)  Deferred revenue arises when the goods are shipped.

Question 11

For a $100,000 trade payable with terms of 2/10,net 45,how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Accepted Answer

A)  $0 
B)  $2,000 
C)  $4,500 
D)  $10,000 
A)  $0 
B)  $2,000 
C)  $4,500 
D)  $10,000

Question 12

In December 2017,a shoe store offered its customers a discount voucher that entitles them to a 30% discount on their purchases the following January.The store's sales for December 2017,were of $2 million and 15,000 vouchers were awarded to customers.The store estimates that approximately 20% of the vouchers will be redeemed by customers and that sale proceeds in January 2018 will be of $1.5 million.
Provide the necessary journal entries for fiscal 2017 and 2018.

Accepted Answer

2017
 @#IMG-DLM&_TB1

Question 13

For each independent situation:
1.A former employee of Melvin Minimarket Inc.sued the company for $900,000,alleging that the company owner sexually harassed her.Melvin's lawyers suggest that the lawsuit has a 30-40% probability of success and that,if successful,the plaintiff will be awarded between $400,000 and $500,000.
2.Leduc Pyrotechnics Ltd.received a $15,000 fee to guarantee the $800,000 bank indebtedness of Kenora Fireworks Inc.The fair value of the guarantee is initially estimated to be $15,000.
3.Montomery Syringes Co.sued a competitor for $800,000,alleging corporate espionage.Montomery's legal counsel believes that the company will be successful and will be awarded somewhere in the range of $650,000 to $800,000.
Required:
Describe how the event should be dealt with in the financial statements and explain why.Prepare all required journal entries.

Accepted Answer

1.This contingent liability does not nee

Question 14

Which statement about contingent assets is correct?

Accepted Answer

A)  It involves only potential economic outflows of resources. 
B)  It is a possible asset that depends upon the outcome of a future event. 
C)  It involves uncertainty about either the timing or amount of payment. 
D)  It is a condition that depends upon the outcome of a forecasted event. 
A)  It involves only potential economic outflows of resources. 
B)  It is a possible asset that depends upon the outcome of a future event. 
C)  It involves uncertainty about either the timing or amount of payment. 
D)  It is a condition that depends upon the outcome of a forecasted event.

Question 15

Which statement about contingent liabilities is correct?

Accepted Answer

A)  It is a present obligation that will probably result in the economic outflow of resources. 
B)  It involves uncertainty about either the timing of payment or the amount of payment. 
C)  It is an obligation that arises from past transactions and events and can be reliably measured. 
D)  It is a present obligation that arises from past events but it cannot be reliably measured. 
A)  It is a present obligation that will probably result in the economic outflow of resources. 
B)  It involves uncertainty about either the timing of payment or the amount of payment. 
C)  It is an obligation that arises from past transactions and events and can be reliably measured. 
D)  It is a present obligation that arises from past events but it cannot be reliably measured.

Question 16

Which of the following is a financial liability?

Accepted Answer

A)  A magazine publisher's obligation to provide the magazine monthly for an agreed upon period. 
B)  Warranties. 
C)  Accounts payable. 
D)  Income taxes payable. 
A)  A magazine publisher's obligation to provide the magazine monthly for an agreed upon period. 
B)  Warranties. 
C)  Accounts payable. 
D)  Income taxes payable.

Question 17

Indemnities and letters of credit are examples of?

Accepted Answer

A)  Commitments. 
B)  Provisions. 
C)  Contingencies. 
D)  Guarantees. 
A)  Commitments. 
B)  Provisions. 
C)  Contingencies. 
D)  Guarantees.

Question 18

Which is an example of a liability?

Accepted Answer

A)  The decision to borrow $150,000 from the ABC Bank on January 15, 2013. 
B)  Withdrawing $10,000 from the operating line of credit on January 15, 2013. 
C)  Selecting the supplier to provide the raw materials for the manufacturing process. 
D)  Choosing the site for a future plant expansion from a list of several possible choices. 
A)  The decision to borrow $150,000 from the ABC Bank on January 15, 2013. 
B)  Withdrawing $10,000 from the operating line of credit on January 15, 2013. 
C)  Selecting the supplier to provide the raw materials for the manufacturing process. 
D)  Choosing the site for a future plant expansion from a list of several possible choices.

Question 19

In 2017,Johnson's Cycles Inc.sold 5,000 mountain bikes.For the first time,Johnson offered an in-store,no-charge,two-year warranty on each bike sold.Company management estimates that the average cost of providing the warranty is $8 per unit in the first year of coverage and $11 per unit in the second year.
Johnson's warranty-related expenditures totaled $36,500 for labor costs during 2017.
Required:
a.Prepare the summary journal entry to recognize Johnson's warranty expense in 2017.
b.Prepare the summary journal entry to recognize the warranty service provided in 2017.
c.Determine the total provision for warranty obligations that will be reported on the company's balance sheet at year-end.Assuming that all sales transactions and warranty service took place on the last day of the year,how much of the warranty obligation will be classified as a current liability? As a non-current liability?

Accepted Answer

a.
 @#IMG-DLM&_TB1321_00_TB1321_00_TB1321_00 b. @#IMG-DLM&_T

Question 20

Which statement about sales taxes is correct?

Accepted Answer

A)  The consumer is responsible for remitting the tax to the government. 
B)  Taxes are uniformly applied to all sale transactions. 
C)  Businesses can deduct the GST paid on their purchases from GST collected. 
D)  The same products that are exempt from GST are exempt from PST. 
A)  The consumer is responsible for remitting the tax to the government. 
B)  Taxes are uniformly applied to all sale transactions. 
C)  Businesses can deduct the GST paid on their purchases from GST collected. 
D)  The same products that are exempt from GST are exempt from PST.

Explain what rebates are and how they are accounted for in the financial statements.

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

Which statement is correct?

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

Which of the following groups includes only financial liabilities?

Which of the following is true?

Which statement is correct about financial and non-financial liabilities?

Which statement about deferred revenue is correct?

For a $100,000 trade payable with terms of 2/10,net 45,how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Which statement about contingent assets is correct?

Which statement about contingent liabilities is correct?

Which of the following is a financial liability?

Indemnities and letters of credit are examples of?

Which is an example of a liability?

Which statement about sales taxes is correct?

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

Explain what rebates are and how they are accounted for in the financial statements.

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

Which statement is correct?

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

Which of the following groups includes only financial liabilities?

Which of the following is true?

Which statement is correct about financial and non-financial liabilities?

Which statement about deferred revenue is correct?

For a $100,000 trade payable with terms of 2/10,net 45,how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Which statement about contingent assets is correct?

Which statement about contingent liabilities is correct?

Which of the following is a financial liability?

Indemnities and letters of credit are examples of?

Which is an example of a liability?

Which statement about sales taxes is correct?

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