Exam 13: Current Liabilities and Contingencies

State and Federal Unemployment Taxes (SUTA and FUTA)must be withheld from employees' wages.

Short-term obligations can be reported as long-term liabilities if:

Under IFRS,a liability that is refinanced after the balance sheet date but before the financial statements are issued would typically be classified as a current liability.

Providing a monetary rebate program for purchasing a product:

Slotnick Chemical received customer deposits on returnable containers in the amount of $300,000 during 2016.Fifteen percent of the containers were not returned.The deposits are based on the container cost marked up 20%.How much profit did Slotnick realize on the forfeited deposits?

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Lake Co.receives nonrefundable advance payments with special orders for containers constructed to customer specifications.Related information for 2016 is as follows ($ in millions): What amount should Lake report as a current liability for advances from customers in its Dec.31,2016,balance sheet?

On December 31,2016,L Inc.had a $1,500,000 note payable outstanding,due July 31,2017.L borrowed the money to finance construction of a new plant.L planned to refinance the note by issuing long-term bonds.Because L temporarily had excess cash,it prepaid $500,000 of the note on January 23,2017.In February 2017,L completed a $3,000,000 bond offering.L will use the bond offering proceeds to repay the note payable at its maturity and to pay construction costs during 2017.On March 13,2017,L issued its 2016 financial statements.What amount of the note payable should L include in the current liabilities section of its December 31,2016,balance sheet?

Amber Inc.is one of the largest pharmacy retailers in mid-America.In its 2016 annual report to shareholders,it made the following disclosure: In 2011,Amber assigned a number of leases to Bell's Inc.and Home Stores,Inc. ,as part of the sale of the Company's former Eastern divisions.Amber is contingently liable if Bell's and Home are unable to continue making rental payments on these leases.In 2015,Amber recorded a pretax charge to earnings of $42.7 million to recognize the estimated lease liabilities associated with the Bell's and Home bankruptcies and for a single lease from Amber's former Georgia division.In 2016,Bell's began the liquidation process and Home emerged from bankruptcy and,based on the resolution of various leases,Amber reversed $12.1 million of this accrual. Explain the accounting principle(s)that required Amber to record the $42.7 million charge in 2015 and the $12.1 million reversal in 2016.

Revenue is recognized upon sale of gift cards,rather than being deferred.

Branch Company,a building materials supplier,has $18,000,000 of notes payable due April 12,2017.At December 31,2016,Branch signed an agreement with First Bank to borrow up to $18,000,000 to refinance the notes on a long-term basis.The agreement specified that borrowings would not exceed 75% of the value of the collateral that Branch provided.At the date of issue of the December 31,2016,financial statements,the value of Branch's collateral was $20,000,000.On its December 31,2016,balance sheet,Branch should classify the notes as follows:

Carpenter Inc.had a balance of $80,000 in its quality-assurance warranty liability account as of December 31,2015.In 2016,Carpenter's warranty expenditures were $445,000.Its warranty expense is calculated as 1% of sales.Sales in 2016 were $40 million.What was the balance in the warranty liability account as of December 31,2016?

Which of the following is true about the initial journal entry used to record extended warranties?

Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet?

A line of credit is an agreement to provide long-term financing,typically made with a bank or a group of banks.

A long-term liability should be reported as a current liability in a classified balance sheet if the long-term debt:

A customer of Razor Sharpeners alleges that Razor's new razor sharpener had a defect that resulted in serious injury to the customer.Razor believes the customer has a 51% chance of winning the case,and that if the customer wins the case,there is a range of losses of between $1,000,000 and $3,000,000 in which any number is equally likely to occur.Under IFRS,Razor should accrue a liability in the amount of:

Financial statement note disclosure is required for material potential losses when the loss is at least reasonably possible:

Barbara Muller Services (BMS)pays its employees monthly.The payroll information listed below is for January 2016,the first month of BMS's fiscal year. The journal entry to record payroll for the January 2016 pay period will include a debit to payroll tax expense of:

Current liabilities normally are recorded at their: