Exam 9: Current Liabilities, contingencies, and the Time Value of Money

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. For a given single sum invested at 8% for 4 years,how will the future value be affected if the compounding period is changed from annual to quarterly?

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. How much would have to be deposited in a savings account earning 6%,so that equal annual withdrawals of $200 can be made at the end of each of 10 years? The balance at the end of the last year would be zero.

Below are several independent items listed for which the outcome of events is unknown at year-end,December 31,2012. a.Margo Company had a barge that leaked oil into the waters surrounding Alaska.The company's legal counsel believes that the outcome may be unfavorable but has not been able to estimate the costs of the possible loss. b.It is alleged by Margo Company that ABC Company has infringed on its trademark,during a recent advertising campaign.Margo is suing ABC and its legal experts believe that the suit will result in an award of $750,000 in Margo's favor. c.Margo offers 2-year warranties on the equipment it sells and believes that 5% of its equipment will require warranty repairs. d.A $35 coupon,good for one year is offered by Margo during December.At December 31,approximately 10% of the coupons have been redeemed and it is estimated that there will be a total redemption rate of 45%. e.Margo Company has been sued by the federal government for EPA violations.The company's legal counsel believes that there will be an unfavorable verdict and has made an estimate of the probable loss. REQUIRED: 1.Identify which of the items (a)through (e)should be recorded at year-end. 2.Identify which of the items (a)through (e)should not be recorded but should be disclosed in the year-end financial statements.

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Denise wants to help pay for her niece's college tuition.Her niece will begin college in one year.How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for 4 years,and reduce the account balance to zero at the end of the 4 years?

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Barton Company has just purchased a machine with a cost of $100,000,and signed a note agreeing to pay the manufacturer equal annual amounts of $17,400.If the current rate of interest is 8%,how many equal annual payments will be made?

The current maturity of long-term debt is a current liability.

If a bank discounts a note,then the borrower needs to only pay the cash received and not the face value of the note.

Speed Company has current assets of $150,000 and current liabilities of $60,000.How much inventory could it purchase on account and achieve its minimum desired current ratio of 2 to 1?

Which of the following statements about current liabilities is true?

Which of the following statements regarding contingencies is true?

On October 1,Lawrence Company borrowed $60,000 from Fourth National Bank on a 1-year,7% note.If the company's fiscal year ends as of December 31,Lawrence should make an entry to increase

A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to

Assume the current ratio is 3 to 4.Purchases of inventory on account would cause the current ratio to

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. The future value of equal semi-annual payments of $500 at 8% compounded semiannually for 4 years is

If current assets amount to $62,000,total assets $350,000,current liabilities $31,000,and total liabilities $125,000,then the current ratio is

All of the following are characteristics of current liabilities except:

International accounting standards use the term provision for those contingent items that must be recorded on the balance sheet.

Warranty expenses are the result of the selling company's estimate of the number of units sold during the current year that may become defective and need repair or replacement during the warranty period.

Income taxes payable is a current liability.

You are interested in accumulating $10,000 so that you can take a cruise in 3 years.If you trying to solve for the amount that you need to invest each year,earning 6% interest compounded annually,the $10,000 represents: