Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

A company purchases an asset on a deferred payment plan,ultimately paying $15,000.On the payment date,the company would

Accepted Answer

A) credit Cash for less than $15,000. 
B) debit Interest Expense for the imputed amount. 
C) debit the asset account for $15,000. 
D) debit Accounts Payable for $15,000. 
A) credit Cash for less than $15,000. 
B) debit Interest Expense for the imputed amount. 
C) debit the asset account for $15,000. 
D) debit Accounts Payable for $15,000.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following descriptions would not fit the definition of a liability?

Accepted Answer

A) Obligation to deliver services for which payment was received in advance 
B) Result of past transaction 
C) Future obligation for future salary payments 
D) Present obligation for future payment 
A) Obligation to deliver services for which payment was received in advance 
B) Result of past transaction 
C) Future obligation for future salary payments 
D) Present obligation for future payment

Question 5

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 6

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 7

Jeffrey Gray is paid $6 per hour,plus double-time for hours worked on weekends.During the two-week period ending February 5,Jeffrey worked 70 hours on weekdays and 8 hours on weekends.Social Security taxes are 6.2 percent,Medicare taxes are 1.45 percent,$65 is withheld for federal taxes,$18 is withheld for state income taxes,and $24 is withheld for charities.In addition,Jeffrey's employer must pay Social Security taxes of 6.2 percent,Medicare taxes of 1.45 percent,federal unemployment taxes of 0.8 percent,and state unemployment taxes of 5.4 percent.Calculate (a)Jeffrey's gross earnings, (b)Jeffrey's net pay, (c)the employer's payroll taxes expense,and (d)the total cost of employing Jeffrey for the two-week period.Round all amounts to the nearest penny.

Accepted Answer

a.$516.00 [(70 × $6)+ (8 × $12

Question 8

A customer is injured using a company's product.The potential liability that may result is called a(n)

Accepted Answer

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

Question 9

Liabilities generally arise from expected future transactions.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Which of the following is both an estimated liability and a contingent liability?

Accepted Answer

A) Cosignature on $500 loan 
B) Current portion of long-term debt 
C) Warranty liability 
D) Liability for dividends 
A) Cosignature on $500 loan 
B) Current portion of long-term debt 
C) Warranty liability 
D) Liability for dividends

Question 12

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

Accepted Answer

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

Question 13

To find the days' payable,

Accepted Answer

A) divide 365 by the payables turnover. 
B) multiply the payables turnover by 365. 
C) divide the payables turnover by 365. 
D) subtract 365 from the payables turnover. 
A) divide 365 by the payables turnover. 
B) multiply the payables turnover by 365. 
C) divide the payables turnover by 365. 
D) subtract 365 from the payables turnover.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The owner of an amusement park is considering installing a new ride.The ride would cost $10,000,produce an estimated net cash flow of $1,575 annually,and last for nine years.
a.Assuming an interest rate of 10 percent,what is the present value of the net cash flows expected from the ride? Use future value and/or present value tables in calculating your answer.
b.Should the ride be purchased?

Accepted Answer

a.$9,070.43 [($1,575 × 5.759 (

Question 16

Which of the following is a measure of liquidity?

Accepted Answer

A) payables turnover 
B) the current ratio 
C) working capital 
D) All of these are used to evaluate a company's liquidity. 
A) payables turnover 
B) the current ratio 
C) working capital 
D) All of these are used to evaluate a company's liquidity.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

All factors in a future value table must be less than or equal to 1.000.

Accepted Answer

A) True 
 B)False

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

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

Accepted Answer

A) True 
 B)False

Exam 11: Current Liabilities and Fair Value Accounting

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

A company purchases an asset on a deferred payment plan,ultimately paying $15,000.On the payment date,the company would

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

Which of the following descriptions would not fit the definition of a liability?

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

A contingent liability is best described as a(n)

A customer is injured using a company's product.The potential liability that may result is called a(n)

Liabilities generally arise from expected future transactions.

Which of the following is both an estimated liability and a contingent 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

To find the days' payable,

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

Which of the following is a measure of liquidity?

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

All factors in a future value table must be less than or equal to 1.000.

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

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

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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