Exam 8: Current Liabilities and Fair Value Accounting

Calculate answers to the following questions using future value and/or present value tables. a. If $100 is deposited in an account paying 8 percent simple interest, what will be the value of the account in five years? b. If an accumulation of $4,000 is desired at the end of four years, what amount must be deposited now to accomplish that goal, assuming 12 percent interest compounded annually? c. A deposit of $1,000 made at the end of every six months for five years will grow to what amount, assuming 10 percent interest compounded semiannually? d. What is the present value of $150 received at the end of each year for 4 years, assuming 9 percent interest compounded annually? e. What amount must be deposited at the bank today to grow to $10,000 in five years, assuming 14 percent interest compounded semiannually?

A company purchases an asset on a deferred payment plan,ultimately paying $10,000.On the payment date,the company would

All of the following are classified as definitely determinable liabilities except

If the amount of a liability cannot be exactly determined,it should not be recorded.

The term wages refers to the compensation of employees who are paid at a monthly or yearly rate.

If any portion of a long-term debt is to be paid in the next year,the entire debt should be classified as a current liability.

Of a company's employees,75 percent typically qualify to receive two weeks' paid vacation out of 50 working weeks per year.The entry to record the amount of estimated liability for vacation pay for a week in which the total payroll is $9,600 :

Use this information to answer the following question. The transactions below pertain to Broyer Company,whose fiscal year ends September 30. Sept. 10 Received cash for a 90-day, 12 percent, $\$ 25,000$ note payable. Interest is in adclition to the face value. 30 Made end-of-year adjusting entry to accrue interest expense. The entry to record the September 10 transaction (amounts rounded)is:

A contingent liability is recognized when the amount can be reasonably estimated and the likelihood of loss is probable.

Dougan Company manufactures and sells widgets.Each widget costs $60 and sells for $100.Each widget carries a warranty that provides for free replacement if it fails for any reason during the next 36 months.In the past,4 percent of the widgets have had to be replaced under the warranty.During May,Dougan sold 2,000 widgets and replaced 150 under warranty.Calculate the product warranty expense for the month.Show your computation.

Jim Janney is paid $6 per hour,plus double-time for hours worked on weekends.During the two-week period ending February 5,Janney worked 70 hours on weekdays and 8 hours on weekends.Social security taxes are 6.2 percent,Medicare taxes are 1.45 percent,$65 is withheld for federal taxes,$18 is withheld for state income taxes,and $24 is withheld for charities.In addition,Janney's employer must pay social security taxes of 6.2 percent,Medicare taxes of 1.45 percent,federal unemployment taxes of .8 percent,and state unemployment taxes of 5.4 percent.Calculate (a)Janney's gross earnings,(b)Janney's net pay,(c)the employer's payroll taxes expense,and (d)the total cost of employing Janney for the two-week period.Round all amounts to the nearest penny.

Payables turnover is measured in number of days.

Vacation pay is charged properly as an expense in the month in which the employee takes a vacation.

The closing entry that would be made at the yearend transferring the interest expense of $50 on a note is:

Unearned revenue is an example of a definitely determinable liability.

Fabian Company is considering the purchase of a machine that will save the company $2,000 per year in operating costs for a period of seven years.The most it should pay for the machine is equal to

An ordinary annuity is a series of equal payments made at the end of equal intervals of time.

Under what circumstances is a contingent liability reflected in the accounting records as though an actual liability exists?

You win the grand prize and can choose between receiving $100,000 today or $20,000 per year for seven years.Ignoring income taxes,how would you go about making your decision?

To find the days' payable,