Exam 13: Current Liabilities and Contingencies

How are customer advances and refundable deposits similar and yet different?

The cost of customer premium offers should be charged to expense:

The key accounting considerations relating to accounts payable are:

Which of the following is a contingency that would most likely require accrual?

Universal Travel Inc. borrowed $500,000 on November 1, 2013, and signed a 12-month note bearing interest at 6%. Interest is payable in full at maturity on October 31, 2014. In connection with this note, Universal Travel Inc. should report interest payable at December 31, 2013, in the amount of:

Slotnick Chemical received customer deposits on returnable containers in the amount of $300,000 during 2013. 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?

This is a loss contingency. Barone can use the information occurring after the end of the year in determining appropriate disclosure. It is unlikely that Barone would choose to accrue the $18 million loss because the judgment will be appealed and that outcome is uncertain. A disclosure note is appropriate:

Amounts withheld from employees in connection with payroll often represent liabilities to third parties.

Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 2013 is as follows ($ in millions): What amount should Lake report as a current liability for advances from customers in its Dec. 31, 2013, balance sheet?

At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided. These customer advances represent:

What is the point of the last paragraph of the Goodday disclosure? Explain in terms of authoritative GAAP.

Briefly explain the GAAP requirement from which the costs/obligations for environmental cleanup and product liability/tort claim matters were accrued in the financial statements.

Panther Co. had a warranty liability of $350,000 at the beginning of 2013 and $310,000 at the end of 2013. Warranty expense is based on 4% of sales, which were $50 million for the year. What were the warranty expenditures for 2013?

Show the summary journal entry that Goodday recorded for the environmental cleanup and product liability/tort claim matters, described in the footnote disclosure.

Indicate how TinyPart would disclose or account for the lawsuit described in part (b) under U.S. GAAP and under IFRS in the financial statements for the year ended December 31, 2013.

What is the rebate promotion liability that Holyoak should report in its December 31, 2013, balance sheet?

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

Which of the following is a contingency that should be accrued?

Funzy Cereal includes one coupon in each package of Wheatos that it sells and offers a toy car in exchange for $1.00 and three coupons. The cars cost Funzy $1.50 each. Experience indicates that 40% of the coupons eventually will be redeemed. During the last month of 2013, the first month of the offer, Funzy sold 12 million boxes of Wheatos and 2.4 million of the coupons were redeemed. What amount should Funzy report as a promotional expense for coupons on its December 31, 2013, income statement?

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: