Question 1

Which of the following entail essentially the same accounting treatment?

Accepted Answer

A) Coupons for cash rebates and coupons for other premiums. 
B) Cents-off coupons and coupons for other premiums. 
C) Cents-off coupons and coupons for cash rebates. 
D) All of the above are correct. 
A) Coupons for cash rebates and coupons for other premiums. 
B) Cents-off coupons and coupons for other premiums. 
C) Cents-off coupons and coupons for cash rebates. 
D) All of the above are correct.

Question 2

Unlike the Social Security tax there is no maximum wage base for the Medicare portion of the FICA tax.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if:

Accepted Answer

A) The likelihood of a loss is remote. 
B) The incurrence of a loss is reasonably possible. 
C) The incurrence of a loss is more likely than not. 
D) The likelihood of a loss is probable. 
A) The likelihood of a loss is remote. 
B) The incurrence of a loss is reasonably possible. 
C) The incurrence of a loss is more likely than not. 
D) The likelihood of a loss is probable.

Question 5

Identify the major components included in the official definition of a liability as set forth by Statement of Financial Accounting Concepts No. 6, "Elements of Financial Statements."

Accepted Answer

The SFAC No. 6 definition of a liability

Question 6

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

Accepted Answer

Under U.S. GAAP TinyPart would not consi

Question 7

Amber Inc. is one of the largest pharmacy retailers in mid-America. In its 2013 annual report to shareholders, it made the following disclosure:
In 2008, 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 2012, 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 2013, 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 2012 and the $12.1 million reversal in 2013.

Accepted Answer

GAAP requires that a loss and correspond

Question 8

In 2013, Cap City Inc. introduced a new line of televisions that carry a two-year warranty against manufacturer's defects. Based on past experience with similar products, warranty costs are expected to be approximately 1% of sales during the first year of the warranty and approximately an additional 3% of sales during the second year of the warranty. Sales were $6,000,000 for the first year of the product's life and actual warranty expenditures were $29,000. Assume that all sales are on credit.
Required:
1. Prepare journal entries to summarize the sales and any aspects of the warranty for 2013.
2. What amount should Cap City report as a liability at December 31, 2013?

Accepted Answer

The answer of In 2013, Cap City Inc. introduced a...

Question 9

In May of 2013, Raymond Financial Services became involved in a penalty dispute with the EPA. At December 31, 2013, the environmental attorney for Raymond indicated that an unfavorable outcome to the dispute was probable. The additional penalties were estimated to be $770,000 but could be as high as $1,170,000. After the year-end, but before the 2013 financial statements were issued, Raymond accepted an EPA settlement offer of $900,000. Raymond should have reported an accrued liability on its December 31, 2013, balance sheet of:

Accepted Answer

A) $770,000. 
B) $900,000. 
C) $970,000. 
D) $1,170,000. 
A) $770,000. 
B) $900,000. 
C) $970,000. 
D) $1,170,000.

Question 10

When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes:

Accepted Answer

A) A debit to a revenue and a credit to a liability account. 
B) A debit to a revenue and a credit to an asset account. 
C) A debit to an asset and a credit to a revenue account. 
D) A debit to a liability and a credit to a revenue account. 
A) A debit to a revenue and a credit to a liability account. 
B) A debit to a revenue and a credit to an asset account. 
C) A debit to an asset and a credit to a revenue account. 
D) A debit to a liability and a credit to a revenue account.

Question 11

When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:

Accepted Answer

A) Reported in the income statement and disclosed. 
B) Offset against shareholders' equity. 
C) Disclosed but not recognized in the income statement. 
D) Neither recognized in the income statement nor disclosed. 
A) Reported in the income statement and disclosed. 
B) Offset against shareholders' equity. 
C) Disclosed but not recognized in the income statement. 
D) Neither recognized in the income statement nor disclosed.

Question 12

Which of the following is the best definition of a current liability?

Accepted Answer

A) An obligation payable within one year. 
B) An obligation payable within one year of the balance sheet date. 
C) An obligation payable within one year or within the normal operating cycle, whichever is longer. 
D) An obligation expected to be satisfied with current assets or by the creation of other current liabilities. 
A) An obligation payable within one year. 
B) An obligation payable within one year of the balance sheet date. 
C) An obligation payable within one year or within the normal operating cycle, whichever is longer. 
D) An obligation expected to be satisfied with current assets or by the creation of other current liabilities.

Question 13

Gain contingencies usually are recognized in a company's income statement when:

Accepted Answer

A) Realized. 
B) The amount can be reasonably estimated. 
C) The gain is reasonably possible and the amount can be reasonable estimated. 
D) The gain is probable and the amount can be reasonably estimated. 
A) Realized. 
B) The amount can be reasonably estimated. 
C) The gain is reasonably possible and the amount can be reasonable estimated. 
D) The gain is probable and the amount can be reasonably estimated.

Which of the following entail essentially the same accounting treatment?

Unlike the Social Security tax there is no maximum wage base for the Medicare portion of the FICA tax.

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

A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if:

Identify the major components included in the official definition of a liability as set forth by Statement of Financial Accounting Concepts No. 6, "Elements of Financial Statements."

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

When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes:

When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:

Which of the following is the best definition of a current liability?

Gain contingencies usually are recognized in a company's income statement when:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Income Measurement and Profitability Analysis

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity Key

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters

Exam 13: Current Liabilities and Contingencies

Which of the following entail essentially the same accounting treatment?

Unlike the Social Security tax there is no maximum wage base for the Medicare portion of the FICA tax.

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

A contingent loss should be reported in a disclosure note to the financial statements rather than being accrued if:

Identify the major components included in the official definition of a liability as set forth by Statement of Financial Accounting Concepts No. 6, "Elements of Financial Statements."

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

When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes:

When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:

Which of the following is the best definition of a current liability?

Gain contingencies usually are recognized in a company's income statement when:

Environment and Theoretical Structure of Financial Accounting

Review of the Accounting Process

The Balance Sheet and Financial Disclosures

The Income Statement, Comprehensive Income, and the Statement of Cash Flows

Income Measurement and Profitability Analysis

Time Value of Money Concepts

Cash and Receivables

Inventories: Measurement

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible Assets: Acquisition and Disposition

Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment

Investments

Bonds and Long-Term Notes

Leases

Accounting for Income Taxes

Pensions and Other Postretirement Benefits

Shareholders Equity Key

Share-Based Compensation and Earnings Per Share

Accounting Changes and Error Corrections

The Statement of Cash Flows Revisited

Filters