Exam 9: Current Liabilities and Contingencies

Which journal entry would probably be made if the modified cash basis of accounting for warranties is in use for a sale made in 2014?

Concerning accounting for warranties, which of the following statements is true?

Radar Company is located in a town that assesses property for tax purposes on July 1 for the period July 1 to June 30. The tax rate is not determined until October 10, and the tax bills are mailed October 20 with payment due by December 31. For the prior fiscal year, the Radar Company paid $18,000. The tax bill for the current fiscal year (July 1, 2014-June 30, 2015) is received on October 23, and property taxes have increased to $18,900. The company pays this amount on October 29. Required: a. Record the monthly property tax accrual recorded in July of 2014. b .Record the payment of the taxes on October 29. c. Record the monthly adjusting entry on October 31.

List and describe the three characteristics of a liability.

Exhibit 9-2 In 2013, the Magtag Company sold 16,000 ovens. Magtag estimated that 14% of the machines would require repairs under the two-year warranty at an average cost of $60. During 2013, Magtag had an actual outlay of $62,000 for repairs under warranty. Magtag uses the expense warranty accrual method. -Refer to Exhibit 9-2. What amount should the company report for estimated liability under warranties at the end of 2013?

Which of the following statements is true?

Exhibit 9-1 The Happy Cereal Company includes a premium in each box of its cereal. For four premiums plus $2.00, customers are entitled to a plastic wiggle worm that costs Happy $4.50 each. Happy expects 60% of the premiums to be redeemed. In 2014, Happy sold 500,000 boxes of cereal and distributed 25,000 wiggle worms. -Refer to Exhibit 9-1. What is Happy's estimated liability for unredeemed premiums on December 31, 2014?

Under current standards of the FASB, liabilities include

Barlo Lunch Snacks places a coupon in each box of its cracker product. Customers may send in five coupons and $3, and the company will send them a recipe book. Sufficient books were purchased at a cost of $5 each. A total of 500,000 boxes of product were sold in 2014. It was estimated that 4% of the coupons would be redeemed. During 2014, 9,000 coupons were redeemed. What is Barlo's premium expense for 2014?

Exhibit 9-3 John Company includes three coupons in each package of cookies it sells. In exchange for 20 coupons, a customer will receive a cookie sheet. John estimates that 30% of the coupons will be redeemed. In 2014, John sold 4,000,000 boxes of cookies and purchased 150,000 Cookie sheets at $2.50 each. During the year, 970,000 coupons were redeemed. -Refer to Exhibit 9-3. What amount should John record as premium expense for 2014?

Current liabilities are obligations of a company that it expects to liquidate within

JST Services employs 50 workers who are each paid $900 per week. JST allows each employee two weeks of paid vacation per year. In addition, the company allows each employee one week of paid sick leave per year. No employees used vacation days or sick leave in the first quarter. In April, a total of three weeks of vacation and one week of sick leave were used by various employees. Required: a. Prepare the joumal entry to record JST's quarterly liability for compensated absences on March 31 . (Ignore payroll taxes.) b. Prepare the April 30 journal entry to record the payment of four weeks of payroll, which includes the employee use of compensated absences. (Ignore payroll taxes.)

Existing claims related to product warranties and litigation as of December 31, 2014, indicate that it is probable that a liability has been incurred. However, as of December 31, 2014, the amount of the obligation cannot be reasonably estimated. Based on these facts, an estimated loss contingency should be

GAAP relating to compensated absences

When selecting within a range of outcome estimates for probable contingencies, the requirements of IFRS and GAAP, respectively, are to accrue what amount in the range? I. II. III. IV. minimum minimum midpoint midpoint minimum midpoint minimum midpoint

When a contingency must be accrued under IFRS, the charge is referred to as

Under what conditions can a short-term obligation be classified as a long-term liability?

Exhibit 9-1 The Happy Cereal Company includes a premium in each box of its cereal. For four premiums plus $2.00, customers are entitled to a plastic wiggle worm that costs Happy $4.50 each. Happy expects 60% of the premiums to be redeemed. In 2014, Happy sold 500,000 boxes of cereal and distributed 25,000 wiggle worms. -Refer to Exhibit 9-1. What is Happy's premium expense for 2014?

Under U.S. GAAP if a company cannot determine whether the event has occurred, the requirement is to recognize a liability if it is probable that the event has occurred.

Which of the following dividends are not considered current liabilities when declared?