Exam 10: Current Liabilities and Fair Value Accounting

There is no limit to the amount of income subject to the FUTA tax.

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.

Unearned revenue is an example of a definitely determinable liability.

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:

Prepare journal entries without explanations for the following transactions involving notes payable for Gomez Company, whose fiscal year ends June 30.. June 20 Paid a trade account payable with a 90-day, 9 percent $60,000 note. Interest is in addition to the face value.

The costs associated with coupons and rebates are usually reflected in contra-revenue accounts.

Commercial paper normally is issued by companies with poor credit ratings.

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

Which of the following statements is true regarding the time value of money?

The current portion of long-term debt is classified as a current liability only if it is due within the next year and is to be paid from current assets.

An asset purchased according to a deferred payment plan should be recorded based on the total cash paid.

Product warranties are an expense of the period in which the related product is sold.

Use this information to answer the following question. Periods Future Value of \ 1 at 12 Percent Future Value of Ordinary Annuity of \ 1 at 12 Percent 1 1.120 1.000 2 1.254 2.120 3 1.405 3.374 A deposit of $2,900 made at the end of each year for three years would grow to how much?

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

All of the following are measures of liquidity except

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

Packett Company allows each employee two weeks' paid vacation after the employee has worked at the company for one year (50 weeks work). On the basis of past experience, management estimates that 80 percent of employees will qualify for vacation pay this year. Assume that the March payroll is $300,000. Compute the vacation pay expense for the month. Show your computation.

A liability rarely is established for product warranties because of uncertainty as to the amount of the liability.

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

Payables turnover is measured in number of days.