Exam 8: Current Liabilities and Fair Value Accounting

An estimated liability is not a definite obligation of the firm because the amount cannot be definitely determined.

The annual interest earned on an amount deposited into a bank account will be the same each year when compound interest is used.

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

Unearned revenue is an example of a definitely determinable liability.

Liabilities generally arise from past transactions.

When accounting for property taxes,which of the following accounts normally would not be credited?

Prepare journal entries without explanations for the following transactions involving notes payable for Willson Company,whose fiscal year ends September 30. Sept. 10 Received cash for a 60 -day, 12 percent, $\$ 10,000$ note payable. Interest is in addition to the face value. 30 Made end-of-year adjusting entry to accue interest expense for the note. Nov. 9 Paid amount due on the note plus interest.

Use this information to answer the following question. Gross payroll \ 16,000 Federal income taxes withheld \ 1,800 Social security and Medicare rate 7.65\% Federal unemployment tax rate .8\% State unemployment tax rate 5.4\% Payroll Taxes and Benefits Expense would be recorded for

Use this information to answer the following question. The following totals for the month of November were taken from the payroll register of Levine Company: Salaries expense \1 2,000 Social security and Medicare taxes withheld 550 Income taxes withheld 2,500 Medical insurance deductions 250 Life insurance deductions 200 Salaries subiect to federal and state unemployment taxes of 6.2 percent 4,000 The entry to record the accrual of employer's payroll taxes would include a debit to Payroll Taxes and Benefits Expense for

Assume that a company received $1,200 in advance for one year membership fee in the fitness center.The entry that would be made to record the recognition of revenue at the end of first month is:

Lines of credit from the bank need not be disclosed in the financial statements or in the notes.

A liability must never be classified as current if it is due in more than one year.

Decision makers rely on the future values,rather than on the present values,of future cash flows.

All liabilities involve an obligation of one sort or another.

When compound interest is used,interest accumulates less quickly than when simple interest is used.

Current liabilities are debts that are expected to be satisfied within

Calculate answers to the following questions: a. To what amount will an $800 deposit grow, assuming 9 percent annual interest, five years, and simple interest? b. To what amount will a $500 deposit grow, assuming 10 percent annual interest paid semiannually, three years, and simple interest?

Calculate answers to the following questions using future value and/or present value tables. a. Tally purchased machinery by executing a $30,000 non-interest-bearing note due in four years. For how much should the machinery be recorded, assuming that the going rate for similar notes is 6 percent? b. Mindy Kwon is making bank deposits of $3,000 at the end of each year for five years, for purposes of buying a car. Assuming an interest rate of 7 percent, how expensive car will she be able to purchase? c. To how much will $2,000 grow, assuming it is invested for 2-1/2 years, with interest of 8 percent, compounded quarterly? d. Liz Astor would like to make a lump-sum deposit today so that she can withdraw $10,000 at the end of each year for the next three years. Assuming a 9 percent interest rate, what should she invest today?

For notes payable whose interest is stated separately,the adjusting entry would consist of a debit to Interest Expense and a credit to Interest Payable.