Exam 9: Current Liabilities, Contingencies, and the Time Value of Money

A company gives a two-year warranty for its product.The estimated liability for product warranties for the upcoming year is a current liability.

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. - Cory and Ginger want to buy an airplane.They find one that will cost $200,000.They must pay 10% down and can get the balance financed with a ten year loan at 7% interest and annual payments.What is their annual payment?

What are examples of accounts that might be classified as accrued liabilities in the Current Liabilities section of the balance sheet?

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. - The total amount of interest compounded quarterly on a $2,000 note payable for one year at 8% is

A contingent liability is recorded if it is probable and can be reasonably estimated.

Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to

An obligation that involves an existing condition for which the outcome is not known with certainty and depends on some event that will occur in the future is call a(n)__________.

A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to

On May 1,Chris Company borrowed $30,000 from Third Street Bank on a one-year,6% note.If the company keeps its records on a calendar year,an entry is needed on December 31 to increase

If a company wishes to accumulate $500,000 in 20 years at 5% by making equal yearly deposits into an account,calculation of the deposits is an application of the

Curtain Corp.stands to receive a sufficient cash settlement from a lawsuit.Curtain needs to record this on its accounting records.

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. - The future value of equal semiannual payments of $500 at 8% compounded semiannually for four years is

If a bank discounts a note,then the borrower needs to only pay the cash received and not the face value of the note.

Assume that you know the total dollar amount of a loan and the amount of the monthly payments.How can you determine the interest rate as a percentage of the loan?

The difference between notes payable and accounts payable is __________.

Discount on Notes Payable is treated as a reduction of notes payable on the balance sheet.

Using the indirect method,an increase in accounts payable would be shown as a(n)__________ in the __________ Activities section of the statement of cash flows.

__________ include any amount that has been incurred due to the passage of time,but not paid as of the balance sheet date.

There are very important differences between U.S.and international standards regarding contingencies.Even the terms used to refer to situations with unknown outcomes differ.Explain these differences.

Which of the following is an example of a contingent liability?