Question 1

Present value refers to an amount that must be invested today at a given rate of interest to produce a given future value.

Accepted Answer

A) True 
 B)False  False

Question 2

Kangjon Company allows each employee two weeks' paid vacation after the employee has worked at the company for one year (50 weeks work).On the basis of past experience,management estimates that 80 percent of employees will qualify for vacation pay this year.Assume that the March payroll is $400,000.Compute the vacation pay expense for the month.Show your computation.

Accepted Answer

$12,800 ($400,000 × 0.80 × 2/50)

Question 3

Contrast the accounting problems presented by definitely determinable liabilities and those associated with estimated liabilities.

Accepted Answer

Definitely determinable liabilities require the accountant to determine the existence and amount of the liabilities and to see that they are recorded properly.With estimated liabilities,the primary accounting problem is to estimate and record the amount of the liability.

Question 4

The product warranty liability is an example of an estimated liability.

Accepted Answer

A) True 
 B)False

Question 5

Current liabilities are debts that are expected to be satisfied within

Accepted Answer

A) one year or the normal operating cycle,whichever is shorter. 
B) one year or the normal operating cycle,whichever is longer. 
C) one year. 
D) the normal operating cycle. 
A) one year or the normal operating cycle,whichever is shorter. 
B) one year or the normal operating cycle,whichever is longer. 
C) one year. 
D) the normal operating cycle.

Question 6

Use this information to answer the following question.   What is the present value of receiving $800 at the end of each year for three years,assuming an APR of 7 percent?

Accepted Answer

A) $652.80 
B) $1,952.40 
C) $2,099.20 
D) $2,244.00 
A) $652.80 
B) $1,952.40 
C) $2,099.20 
D) $2,244.00

Question 7

A contingent liability is recorded in the accounting records

Accepted Answer

A) if the contingency has not been described already in the notes to the financial statements. 
B) if it possibly will become an actual liability and the exact amount is known. 
C) under no circumstances. 
D) if it probably will become an actual liability and the amount can be reasonably estimated. 
A) if the contingency has not been described already in the notes to the financial statements. 
B) if it possibly will become an actual liability and the exact amount is known. 
C) under no circumstances. 
D) if it probably will become an actual liability and the amount can be reasonably estimated.

Question 8

A business accepts a 12 percent,$94,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

Accepted Answer

A) $105,280 
B) $127,840 
C) $116,560 
D) $94,000 
A) $105,280 
B) $127,840 
C) $116,560 
D) $94,000

Question 9

Lines of credit from the bank need not be disclosed in the financial statements or in the notes.

Accepted Answer

A) True 
 B)False

Question 10

Use this information to answer the following question.   You have the opportunity to purchase a machine for $10,000.After careful study of expected costs and revenues,you estimate that the machine will produce a net cash flow of $3,200 annually and will last 5 years.Based on an interest rate of 7 percent,determine the present value of the machine and if the machine should be purchased.

Accepted Answer

A) $13,120,the machine should not be purchased 
B) $13,120,the machine should be purchased 
C) $2,282,the machine should not be purchased 
D) $7,130,the machine should not be purchased 
A) $13,120,the machine should not be purchased 
B) $13,120,the machine should be purchased 
C) $2,282,the machine should not be purchased 
D) $7,130,the machine should not be purchased

Question 11

Use this information to answer the following question. The following totals for the month of September were taken from the payroll register of Meadors Company:
  The entry to record the payment of net payroll would include a

Accepted Answer

A) debit to Salaries Payable for $24,000. 
B) debit to Salaries Payable for $15,900. 
C) debit to Salaries Payable for $17,000. 
D) credit to Cash for $18,100. 
A) debit to Salaries Payable for $24,000. 
B) debit to Salaries Payable for $15,900. 
C) debit to Salaries Payable for $17,000. 
D) credit to Cash for $18,100.

Question 12

Use this information to answer the following question.   What amount must be deposited today so that $1,200 may be withdrawn at the end of each year for three years,assuming an APR of 7 percent?

Accepted Answer

A) $3,148.80 
B) $3,148.00 
C) $3,366.00 
D) $3,850.28 
A) $3,148.80 
B) $3,148.00 
C) $3,366.00 
D) $3,850.28

Question 13

Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?

Accepted Answer

A) Possible warranty claims 
B) Guarantees of the debt of other companies 
C) Possible bankruptcy of an important customer whose account is current 
D) Estimated income taxes for the current year 
A) Possible warranty claims 
B) Guarantees of the debt of other companies 
C) Possible bankruptcy of an important customer whose account is current 
D) Estimated income taxes for the current year

Question 14

Company A's current assets = $10,000,total assets = $26,000,current liabilities = $7,000 and total liabilities = $47,000.What is Company A's working capital?

Accepted Answer

A) $3,000 
B) $21,000 
C) 1.43 
D) 0.55 
A) $3,000 
B) $21,000 
C) 1.43 
D) 0.55

Question 15

A company wishes to make annual contributions into a fund intended to retire $700,000 in debt five years from now.The amount to contribute each year equals $700,000

Accepted Answer

A) divided by the appropriate future value of an ordinary annuity factor. 
B) times the appropriate present value of an ordinary annuity factor. 
C) times the appropriate future value of an ordinary annuity factor. 
D) divided by the appropriate present value of an ordinary annuity factor. 
A) divided by the appropriate future value of an ordinary annuity factor. 
B) times the appropriate present value of an ordinary annuity factor. 
C) times the appropriate future value of an ordinary annuity factor. 
D) divided by the appropriate present value of an ordinary annuity factor.

Question 16

The owner of an amusement park is considering installing a new ride.The ride would cost $10,000,produce an estimated net cash flow of $1,575 annually,and last for nine years.
a. Assuming an interest rate of 10 percent,what is the present value of the net cash flows expected from the ride? Use future value and/or present value tables in calculating your answer.
b. Should the ride be purchased?

Accepted Answer

a.$9,070.43 [($1,575 × 5.759 (

Question 17

Explain why a creditor would be concerned if your company had a current ratio of less than 1.0?

Accepted Answer

A current ratio of less than 1.0 would i

Question 18

All factors in a present value of a single sum table are less than 1.000.

Accepted Answer

A) True 
 B)False

Question 19

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

Accepted Answer

A) Matching 
B) Consistency 
C) Historical cost 
D) Full disclosure 
A) Matching 
B) Consistency 
C) Historical cost 
D) Full disclosure

Question 20

The lower the interest rate,the higher the present value factor.

Accepted Answer

A) True 
 B)False

Present value refers to an amount that must be invested today at a given rate of interest to produce a given future value.

Contrast the accounting problems presented by definitely determinable liabilities and those associated with estimated liabilities.

The product warranty liability is an example of an estimated liability.

Current liabilities are debts that are expected to be satisfied within

Use this information to answer the following question. What is the present value of receiving $800 at the end of each year for three years,assuming an APR of 7 percent?

A contingent liability is recorded in the accounting records

A business accepts a 12 percent,$94,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

Lines of credit from the bank need not be disclosed in the financial statements or in the notes.

Use this information to answer the following question. The following totals for the month of September were taken from the payroll register of Meadors Company: The entry to record the payment of net payroll would include a

Use this information to answer the following question. What amount must be deposited today so that $1,200 may be withdrawn at the end of each year for three years,assuming an APR of 7 percent?

Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?

Company A's current assets = $10,000,total assets = $26,000,current liabilities = $7,000 and total liabilities = $47,000.What is Company A's working capital?

A company wishes to make annual contributions into a fund intended to retire $700,000 in debt five years from now.The amount to contribute each year equals $700,000

Explain why a creditor would be concerned if your company had a current ratio of less than 1.0?

All factors in a present value of a single sum table are less than 1.000.

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

The lower the interest rate,the higher the present value factor.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters

Exam 11: Current Liabilities and Fair Value Accounting

Present value refers to an amount that must be invested today at a given rate of interest to produce a given future value.

Contrast the accounting problems presented by definitely determinable liabilities and those associated with estimated liabilities.

The product warranty liability is an example of an estimated liability.

Current liabilities are debts that are expected to be satisfied within

Use this information to answer the following question. What is the present value of receiving $800 at the end of each year for three years,assuming an APR of 7 percent?

A contingent liability is recorded in the accounting records

A business accepts a 12 percent,$94,000 note due in three years.Assuming simple interest,how much will the business receive when the note falls due?

Lines of credit from the bank need not be disclosed in the financial statements or in the notes.

Use this information to answer the following question. The following totals for the month of September were taken from the payroll register of Meadors Company: The entry to record the payment of net payroll would include a

Use this information to answer the following question. What amount must be deposited today so that $1,200 may be withdrawn at the end of each year for three years,assuming an APR of 7 percent?

Liabilities that might arise from which of the following probably would be disclosed only in the notes to the financial statements?

Company A's current assets = $10,000,total assets = $26,000,current liabilities = $7,000 and total liabilities = $47,000.What is Company A's working capital?

A company wishes to make annual contributions into a fund intended to retire $700,000 in debt five years from now.The amount to contribute each year equals $700,000

Explain why a creditor would be concerned if your company had a current ratio of less than 1.0?

All factors in a present value of a single sum table are less than 1.000.

Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?

The lower the interest rate,the higher the present value factor.

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Supplement: the Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters