Question 1

Assets purchased under a deferred payment plan should be recorded at the present value of the installment payments.

Accepted Answer

A) True 
 B)False

Question 2

Usually,failure to record a liability means failure to record a(n)

Accepted Answer

A) revenue. 
B) note. 
C) expense. 
D) asset. 
A) revenue. 
B) note. 
C) expense. 
D) asset.

Question 3

A business accepts a 12 percent,$94,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

Accepted Answer

A) $105,280 
B) $127,840 
C) $116,560 
D) $94,000 
A) $105,280 
B) $127,840 
C) $116,560 
D) $94,000

Question 4

Wages are compensation of employees at a yearly or monthly rate.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?

Accepted Answer

A) Possible warranty claims 
B) Guarantees of the debt of other companies 
C) Possible bankruptcy of an important customer whose account is current 
D) Estimated income taxes for the current year 
A) Possible warranty claims 
B) Guarantees of the debt of other companies 
C) Possible bankruptcy of an important customer whose account is current 
D) Estimated income taxes for the current year

Question 7

A contingent liability is best described as a(n)

Accepted Answer

A) current liability. 
B) probable liability. 
C) potential liability. 
D) estimated liability. 
A) current liability. 
B) probable liability. 
C) potential liability. 
D) estimated liability.

Question 8

Explain why a creditor would be concerned if your company had a current ratio of less than 1.0?

Accepted Answer

A current ratio of less than 1.0 would i

Question 9

Liabilities generally arise from expected future transactions.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Total payroll for a given week is $34,000.If 70 percent of the company's employees typically qualify to receive two weeks' paid vacation per year (50 weeks),the entry to record estimated liability for vacation pay for the week is

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 12

Calculate answers to the following using future value and/or present value tables:
a.If an accumulation of $1,000 is desired at the end of 4 years,what bank deposit must be made now to accomplish that goal,assuming 10 percent interest compounded annually?
b.A deposit of $600 made at the end of every 6 months for 5 years would grow to what amount,assuming 8 percent interest compounded semiannually.

Accepted Answer

a.$683.00 [($1,000 ×

Question 13

Novack Company has current assets of $100,000,total assets of $300,000,current liabilities of $75,000 of which accounts payable are $35,000,and total liabilities of $150,000.Calculate Novack's working capital and current ratio.

Accepted Answer

Working Capital = Current Asse

Question 14

To determine the payables turnover,one first calculates the days' payable.

Accepted Answer

A) True 
 B)False

Question 15

When a business sells an item and collects a state sales tax on it,a current liability to the state arises.

Accepted Answer

A) True 
 B)False

Question 16

Use this information to answer the following question.   You have the opportunity to purchase a machine for $10,000.After careful study of expected costs and revenues,you estimate that the machine will produce a net cash flow of $3,200 annually and will last 5 years.Based on an interest rate of 7 percent,determine the present value of the machine and if the machine should be purchased.

Accepted Answer

A) $13,120,the machine should not be purchased 
B) $13,120,the machine should be purchased 
C) $2,282,the machine should not be purchased 
D) $7,130,the machine should not be purchased 
A) $13,120,the machine should not be purchased 
B) $13,120,the machine should be purchased 
C) $2,282,the machine should not be purchased 
D) $7,130,the machine should not be purchased

Question 17

Use this information to answer the following question. Panadora Company has the following information for the pay period of January 1-15,2014.Payment occurs on January 20.
 
-Payroll Taxes and Benefits Expense would be recorded for

Accepted Answer

A) $1,984. 
B) $2,248. 
C) $4,432. 
D) $8,032. 
A) $1,984. 
B) $2,248. 
C) $4,432. 
D) $8,032.

Question 18

Sales Tax Payable is an example of a(n)

Accepted Answer

A) estimated liability. 
B) contingent liability. 
C) trade liability. 
D) definitely determinable liability. 
A) estimated liability. 
B) contingent liability. 
C) trade liability. 
D) definitely determinable liability.

Question 19

The days' payable shows the maximum time a company takes to pay its accounts payable.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Current Liabilities and Fair Value Accounting

Assets purchased under a deferred payment plan should be recorded at the present value of the installment payments.

Usually,failure to record a liability means failure to record a(n)

A business accepts a 12 percent,$94,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

Wages are compensation of employees at a yearly or monthly rate.

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

Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?

A contingent liability is best described as a(n)

Explain why a creditor would be concerned if your company had a current ratio of less than 1.0?

Liabilities generally arise from expected future transactions.

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

Total payroll for a given week is $34,000.If 70 percent of the company's employees typically qualify to receive two weeks' paid vacation per year (50 weeks),the entry to record estimated liability for vacation pay for the week is

Novack Company has current assets of $100,000,total assets of $300,000,current liabilities of $75,000 of which accounts payable are $35,000,and total liabilities of $150,000.Calculate Novack's working capital and current ratio.

To determine the payables turnover,one first calculates the days' payable.

When a business sells an item and collects a state sales tax on it,a current liability to the state arises.

Use this information to answer the following question. Panadora Company has the following information for the pay period of January 1-15,2014.Payment occurs on January 20. -Payroll Taxes and Benefits Expense would be recorded for

Sales Tax Payable is an example of a(n)

The days' payable shows the maximum time a company takes to pay its accounts payable.

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

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Unincorporated Businesses

Accounting for Investments

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