Question 1

Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to

Accepted Answer

A) increase 
B) decrease 
C) be unchanged since the effects offset one another 
D) be unchanged since it has no effect on any current accounts

Question 2

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.
If you must calculate the present value of an amount at 8% compounded quarterly for 2 years, then the interest factor used in the calculation is

Accepted Answer

A) 8% for two periods 
B) 2% for eight periods 
C) the interest factor for 8% for two periods divided by 4 
D) twice that for one period at 8% multiplied by 2

Question 3

A company has $200 in cash, $500 in accounts receivable, and $700 in inventory.If current liabilities are $400, then the quick ratio would be

Accepted Answer

A) 1.75 to 1 
B) 2.25 to 1 
C) 3.00 to 1 
D) 3.50 to 1

Question 4

In 2015, Morton Co.sold 150 hot air balloons at $4,000 each.The balloons carry a 5-year warranty for defects.Morton estimates that repair costs will average 4% of the total selling price.The estimated warranty liability at the beginning of the year was $14,000.$20,000 in claims was actually incurred during the year to honor their warranty.What was the warranty expense for 2015?

Accepted Answer

A) $10,000 
B) $18,000 
C) $20,000 
D) $24,000

Question 5

In the statement of cash flows, an increase in a current liability will appear as an increase in the Financing category.

Accepted Answer

A) True 
 B)False

Question 6

Using the indirect method, an increase in accounts payable would be shown as an) in the
Activities section of the statement of cash flows.

Accepted Answer

The answer of Using the indirect method, an increase in...

Question 7

A company's balance sheet shows the account, Notes Payable.This resulted from a loan made by the company's bank.If the end-of-year balance in the notes payable account exceeds the beginning-of-year balance by $5,000, this is shown on the cash flow statement as an

Accepted Answer

A) inflow of cash of $5,000 in the operating activities category. 
B) outflow of cash of $5,000 in the operating activities category. 
C) inflow of cash of $5,000 in the financing activities category. 
D) outflow of cash of $5,000 in the financing activities category.

Question 8

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.
If the interest factor used to calculate the future value of $1 at 6% for 5 periods is 1.338, then the present value of $1 at 6% for 5 periods is

Accepted Answer

A) 1.338 × 1.338. 
B) 1/1.338. 
C) 1/1.338 × 1.338). 
D) 0.338.

Question 9

For users of financial statements, the current liability classification in the balance sheet is important because it is most closely tied to the concept of profitability.

Accepted Answer

A) True 
 B)False

Question 10

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.
Mackie's individual retirement account IRA) currently has a balance of $100,000 and is earning 6%.Beginning one year from today, what equal annual amounts can be withdrawn from the IRA for 10 years so that the balance after the tenth withdrawal is zero?

Accepted Answer

A) $10,000 
B) $12,950 
C) $13,587 
D) $14,237

Question 11

An invoice received from a supplier for $8,000 on January 1 with terms 1/15, n/30 means that the company should pay

Accepted Answer

A) $7,920 before the end of January. 
B) either $7,920 before January 16 or $8,000 before the end of the month. 
C) $8,000 between January 2 and January 16. 
D) $6,800 before January 16.

Question 12

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?

Accepted Answer

A) $31,680 
B) $34,650 
C) $37,600 
D) $37,720

Question 13

Carrington, Inc.recorded $97,000 in salary expense for January, 2015.Its beginning balance in salaries payable was $3,000 and its ending balance was $4,000.How much was paid in cash for salaries during January, 2015?

Accepted Answer

A) $96,000 
B) $97,000 
C) $98,000 
D) $99,000

Question 14

Compound interest is a repeated calculation of the interest on the principal over certain periods of time.

Accepted Answer

A) True 
 B)False

Question 15

On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a 1-year, 6% note.If the company keeps its records on a calendar year, an entry is needed on December 31 to increase

Accepted Answer

A) Interest Expense, $600. 
B) Interest Expense, $1,800. 
C) Interest Payable, $900. 
D) Interest Payable, $1,200.

Question 16

When a liability is accrued, the account debited in the transaction is a stockholders' equity account.

Accepted Answer

A) True 
 B)False

Question 17

Assume the current ratio is 2 to 1.Payment on accrued salaries payable would cause the current ratio to

Accepted Answer

A) increase 
B) decrease 
C) be unchanged since the effects offset one another 
D) be unchanged since it has no impact on any current accounts

Question 18

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.
David, a high school math teacher, wants to set up an IRA account into which he will deposit $2,000 per year.He plans to teach for 20 more years and then retire.If the interest on his account is 7% compounded annually, how much will be in his account when he retires?

Accepted Answer

A) $ 4,800 
B) $21,118 
C) $74,458 
D) $81,990

Question 19

The difference between notes payable and accounts payable is .

Accepted Answer

The answer of The difference between notes payable and accounts...

Question 20

Accountants need not worry about calculations based upon the concept of the time value of money.

Accepted Answer

A) True 
 B)False

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

Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to

A company has $200 in cash, $500 in accounts receivable, and $700 in inventory.If current liabilities are $400, then the quick ratio would be

In the statement of cash flows, an increase in a current liability will appear as an increase in the Financing category.

Using the indirect method, an increase in accounts payable would be shown as an) in the Activities section of the statement of cash flows.

A company's balance sheet shows the account, Notes Payable.This resulted from a loan made by the company's bank.If the end-of-year balance in the notes payable account exceeds the beginning-of-year balance by $5,000, this is shown on the cash flow statement as an

For users of financial statements, the current liability classification in the balance sheet is important because it is most closely tied to the concept of profitability.

An invoice received from a supplier for $8,000 on January 1 with terms 1/15, n/30 means that the company should pay

Carrington, Inc.recorded $97,000 in salary expense for January, 2015.Its beginning balance in salaries payable was $3,000 and its ending balance was $4,000.How much was paid in cash for salaries during January, 2015?

Compound interest is a repeated calculation of the interest on the principal over certain periods of time.

On May 1, the Chris Company borrowed $30,000 from the Third Street Bank on a 1-year, 6% note.If the company keeps its records on a calendar year, an entry is needed on December 31 to increase

When a liability is accrued, the account debited in the transaction is a stockholders' equity account.

Assume the current ratio is 2 to 1.Payment on accrued salaries payable would cause the current ratio to

The difference between notes payable and accounts payable is .

Accountants need not worry about calculations based upon the concept of the time value of money.