Question 1

If you plan to invest $10,000 and want to determine how much will be accumulated in six years if you earn interest at 7% per year, you would calculate this using the future value of an annuity.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following accounts is not classified as a current liability?

Accepted Answer

A)  Accounts payable 
B)  Note payable, due in three 3 years 
C)  Taxes payable 
D)  Salaries payable

Question 3

Match each of the following terms related to interest and time value of money calculations to their appropriate definition.
-The present amount that is equivalent to an amount at a future time.

Accepted Answer

A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity

Question 4

Auto Designs, Inc.
Use the selected data from the comparative financial statements for Auto Designs, Inc. to answer the questions that follow.
 
-Refer to the account information for Auto Designs, Inc.
REQUIRED:
Calculate the current and quick ratios for 2015 and 2014. Comment on the direction and significance of the change in the ratios.

Accepted Answer

The answer of Auto Designs, Inc.
Use the selected data from...

Question 5

U.S. standards do not require a classified balance sheet, but International accounting standards require companies to present classified balance sheets with liabilities classified as either current or long term.

Accepted Answer

A) True 
 B)False

Question 6

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 7

A current ratio of or better is usually considered a comfortable margin.

Accepted Answer

The answer of A current ratio of or better is...

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 Shidan has $5,000 to invest and wants to have $10,000 at the end of 9 years, what compounded interest rate must she get on her money assume annual compounding?

Accepted Answer

A)  5% 
B)  7% 
C)  8% 
D)  6%

Question 9

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 total amount of interest compounded quarterly on a $1,500 note payable for 1 year at 12% is

Accepted Answer

A)  $180.00 
B)  $187.50 
C)  $ 45.00 
D)  $189.00

Question 10

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as

Accepted Answer

A)  prepaid interest. 
B)  a discount. 
C)  an expense. 
D)  a loss.

Question 11

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 12

An annuity is a series of equal payments made at equal intervals in the future.

Accepted Answer

A) True 
 B)False

Question 13

A firm's year ends on December 31. Its tax is computed and submitted to the U.S. Treasury on March 15 of the
following year. When should the taxes be reported as a liability?

Accepted Answer

The answer of A firm's year ends on December 31....

Question 14

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

Question 15

If the annual interest is 12%, but the compounding is done quarterly, then the interest rate is 4% per period.

Accepted Answer

A) True 
 B)False

Question 16

From the following list, identify whether the change in the account balance during the year would be reported as an operating O, an investing I, or a financing F activity or not separately reported on the statement of cash flows N. Assume that the indirect method is used to determine the cash flows from operating activities.
-Other accrued liabilities

Accepted Answer

A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows

Question 17

Which of the following would appear on the balance sheet as a current liability?

Accepted Answer

A)  A loss from an anticipated strike by employees. 
B)  Premium offers in cereal boxes. 
C)  Potential damages from possible explosions in a fireworks factory. 
D)  The possible loss from a lawsuit.

Question 18

Simple interest on a loan can be calculated by multiplying the principal by the annual interest rate expressed as a percentage of the time in years or a fraction of the time in years.

Accepted Answer

A) True 
 B)False

Question 19

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2014 balance sheet.
-An amount of money owed to the federal government based on the company's annual income.

Accepted Answer

A) Current liability 
B) Long-term liability

Question 20

The liability for a premium offer estimated to be redeemed is not a current liability.

Accepted Answer

A) True 
 B)False

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

If you plan to invest $10,000 and want to determine how much will be accumulated in six years if you earn interest at 7% per year, you would calculate this using the future value of an annuity.

Which of the following accounts is not classified as a current liability?

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -The present amount that is equivalent to an amount at a future time.

U.S. standards do not require a classified balance sheet, but International accounting standards require companies to present classified balance sheets with liabilities classified as either current or long term.

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

A current ratio of or better is usually considered a comfortable margin.

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 total amount of interest compounded quarterly on a $1,500 note payable for 1 year at 12% is

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as

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

An annuity is a series of equal payments made at equal intervals in the future.

A firm's year ends on December 31. Its tax is computed and submitted to the U.S. Treasury on March 15 of the following year. When should the taxes be reported as a liability?

If the annual interest is 12%, but the compounding is done quarterly, then the interest rate is 4% per period.

Which of the following would appear on the balance sheet as a current liability?

Simple interest on a loan can be calculated by multiplying the principal by the annual interest rate expressed as a percentage of the time in years or a fraction of the time in years.

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2014 balance sheet. -An amount of money owed to the federal government based on the company's annual income.

The liability for a premium offer estimated to be redeemed is not a current liability.