Question 1

Common examples of commitments are leases and purchase agreements.

Accepted Answer

A) True 
 B)False

Question 2

Use this information to answer the following question. The following totals for the month of September were taken from the payroll register of Meadors Company:
 
The entry to record the accrual of federal unemployment tax (assume FUTA tax of 0.8 percent)would include a

Accepted Answer

A) credit to Federal Unemployment Tax Payable for $64. 
B) debit to Federal Unemployment Tax Payable for $64. 
C) debit to FUTA Tax Expense for $64. 
D) credit to Payroll Taxes and Benefits Expense for $64. 
A) credit to Federal Unemployment Tax Payable for $64. 
B) debit to Federal Unemployment Tax Payable for $64. 
C) debit to FUTA Tax Expense for $64. 
D) credit to Payroll Taxes and Benefits Expense for $64.

Question 3

Gross earnings minus deductions equal take-home pay.

Accepted Answer

A) True 
 B)False

Question 4

The amount of property tax payable is usually an estimated liability for a portion of the year.

Accepted Answer

A) True 
 B)False

Question 5

A liability is recognized when

Accepted Answer

A) the exact due date is known. 
B) it is paid for. 
C) an obligation has arisen. 
D) the exact amount of the liability is known. 
A) the exact due date is known. 
B) it is paid for. 
C) an obligation has arisen. 
D) the exact amount of the liability is known.

Question 6

Which of the following is not a commitment?

Accepted Answer

A) Lease 
B) Construction of long-term asset 
C) Purchase agreement 
D) Guarantee of debt 
A) Lease 
B) Construction of long-term asset 
C) Purchase agreement 
D) Guarantee of debt

Question 7

Identify and briefly discuss the three approaches for determining fair value identified by the FASB.

Accepted Answer

The FASB identifies three approaches to

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Flint Company produces widgets that cost $30 each and have a 5 percent failure rate.If 500 widgets are sold,the entry to record the estimated product warranty expense would be

Accepted Answer

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

Question 10

Present value refers to an amount that must be invested today at a given rate of interest to produce a given future value.

Accepted Answer

A) True 
 B)False

Question 11

All of the following are estimated liabilities except

Accepted Answer

A) liability for vacation pay. 
B) payroll liabilities. 
C) product warranty liability. 
D) property tax liability. 
A) liability for vacation pay. 
B) payroll liabilities. 
C) product warranty liability. 
D) property tax liability.

Question 12

Use this information to answer the following question. The transactions below pertain to Dunhill Company,whose fiscal year ends April 30.
  The April 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Accepted Answer

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

Question 13

The payables turnover is measured

Accepted Answer

A) in days. 
B) as a percentage. 
C) in dollars. 
D) in times. 
A) in days. 
B) as a percentage. 
C) in dollars. 
D) in times.

Question 14

Lease agreements are

Accepted Answer

A) estimates. 
B) commitments. 
C) liabilities. 
D) contingencies. 
A) estimates. 
B) commitments. 
C) liabilities. 
D) contingencies.

Question 15

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 16

Of a company's employees,50 percent typically qualify to receive two weeks' paid vacation a year (50 weeks).The entry to record the estimated liability for vacation pay for a week in which the total payroll is $8,800 would be

Accepted Answer

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

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

Current liabilities are debts that are expected to be satisfied within

Accepted Answer

A) one year or the normal operating cycle,whichever is shorter. 
B) one year or the normal operating cycle,whichever is longer. 
C) one year. 
D) the normal operating cycle. 
A) one year or the normal operating cycle,whichever is shorter. 
B) one year or the normal operating cycle,whichever is longer. 
C) one year. 
D) the normal operating cycle.

Question 20

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

Exam 11: Current Liabilities and Fair Value Accounting

Common examples of commitments are leases and purchase agreements.

Use this information to answer the following question. The following totals for the month of September were taken from the payroll register of Meadors Company: The entry to record the accrual of federal unemployment tax (assume FUTA tax of 0.8 percent)would include a

Gross earnings minus deductions equal take-home pay.

The amount of property tax payable is usually an estimated liability for a portion of the year.

A liability is recognized when

Which of the following is not a commitment?

Identify and briefly discuss the three approaches for determining fair value identified by the FASB.

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

Flint Company produces widgets that cost $30 each and have a 5 percent failure rate.If 500 widgets are sold,the entry to record the estimated product warranty expense would be

Present value refers to an amount that must be invested today at a given rate of interest to produce a given future value.

All of the following are estimated liabilities except

Use this information to answer the following question. The transactions below pertain to Dunhill Company,whose fiscal year ends April 30. The April 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

The payables turnover is measured

Lease agreements are

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

Of a company's employees,50 percent typically qualify to receive two weeks' paid vacation a year (50 weeks).The entry to record the estimated liability for vacation pay for a week in which the total payroll is $8,800 would be

Sales Tax Payable is an example of a(n)

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

Current liabilities are debts that are expected to be satisfied within

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

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 and Capital Budgeting

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