Exam 8: Current Liabilities and Fair Value Accounting

When a company discounts a note receivable at the bank,it has a contingent liability.

Because accounting measures should be verifiable,liabilities should not be estimated.

The entry that includes a debit to Payroll Taxes and Benefits Expense would also include credits to Social Security Tax Payable and Medicare Tax Payable.

A company enters into a contract to purchase a certain quantity of goods from another company during the following month.At this point,would a liability exist? Explain why or why not.

First City Bank computes interest semiannually.If the interest rate is currently 6 percent per annum,the amount deposited today should be multiplied by which future value factor to calculate the amount that will accumulate by the end of 10 years?

The annual interest earned on an amount deposited into a bank account will increase each year when simple interest is used.

Which of the following is a contingent liability?

State whether each situation below implies a definitely determinable liability (D),an estimated liability (E),a contingent liability (C),or no liability at all (X). _____ 1.Lawsuit filed against the company _____ 2.Payroll liabilities _____ 3.Unearned revenues _____ 4.Accounts payable _____ 5.Product warranty liability _____ 6.Dividend to be declared in future _____ 7.Current portion of long-term debt _____ 8.Discounted notes receivable _____ 9.Liability for vacation pay _____ 10.Guarantee of debt of other companies

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

Use this information to answer the following question. Periods Present Value of \ 1 at 7 Percent Present Value of Ordinary Annuty of \ 1 at 7 Percent 1 0.935 0.935 2 0.873 1.808 3 0.816 2.624 What amount must be deposited today so that $600 may be withdrawn at the end of each year for three years?

The days' payable shows how long,on average,a company takes to pay its accounts payable.

On January 2,2010,Lester Company,a calendar-year company,issued $40,000 of notes payable,of which $10,000 is due on January 2 for each of the next four years.The proper balance sheet presentation on December 31,2010,is

Which of the following is not a component of the operating cycle?

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 addition to the face value. 30 Made end-of-year adjusting entry to accrue interest expense. The September 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Interest on a promissory note is recognized when the note is issued.

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.

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

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.

The declaration of dividends is solely the decision of the corporation's stockholders.

The classification of a liability as current or long-term is important because it may affect the evaluation of a company's liquidity.