Question 1

The journal entry required on the company's books to record the note payable on July 1, 20X0 would include which of the following?

Accepted Answer

A)  A credit to notes payable for $12,000. 
B)  A credit to notes payable for $12,960. 
C)  A debit to cash for $11,040. 
D)  A debit to interest expense for $960.

Question 2

In 20X3, C Co reported a trade payables turnover ratio of 1.85 and a current ratio of 0.66. Their statement of ﬁnancial position shows $2.1 billion in marketable securities not included in their current assets and cash ﬂow from operations. Which of the following interpretations is most likely?

Accepted Answer

A)  Since the two ratios are fairly high, it indicates C Co has little diﬃculty paying its bills in a timely manner. 
B)  Since both these ratios are low, it might indicate poor liquidity and inability to pay vendors in a timely manner. 
C)  C Co practices aggressive cash management policies including investing excess cash and using vendors to ﬁnance operations by making slow payment to them. 
D)  C Co must be carrying a low amount of current liabilities in comparison to its total liabilities.

Question 3

Income tax expense reported on the income statement is $45,000 for 20X0, and the tax return for 20X0 (the ﬁrst year) shows an income tax liability of $42,000 because of a deduction that cannot be taken until 20X1. The future income tax amount on the statement of ﬁnancial position at the end of 20X0 will be which of the following?

Accepted Answer

A)  debit of $3,000 
B)  credit of $3,000 
C)  credit of $42,000 
D)  credit of $45,000

Question 4

The following information is available for Lowell Company: $$\begin{array} { | l | r | } 
\hline \text { Current Assets } & \
\hline \text { Cash } & \$ 4,000 \
\hline \text { Marketable securities } & 75,000 \
\hline \text { Accounts receivable } & 61,000 \
\hline \text { Inventories } & 110,000 \
\hline \text { Prepaid expenses } & \underline { 30,000 } \
\hline \text { Total current assets } & \$ 280,000 \
\hline
\end{array}$$ Total current liabilities are $80,000. The quick ratio for Lowell is

Accepted Answer

A)  1.75 
B)  2.13 
C)  3.25 
D)  1.3

Question 5

Purchase of inventory for cash will:

Accepted Answer

A)  increase the current ratio. 
B)  decrease the current ratio. 
C)  increase the quick ratio. 
D)  decrease the quick ratio.

Question 6

There is a reciprocal relationship between which of the following?

Accepted Answer

A)  Present value of the annuity of $1 and the present value of $1. 
B)  Future value of $1 and the future value of an annuity of $1. 
C)  Present value of $1 and the future value of $1. 
D)  Present value of the annuity of $1 and the future value of annuity of $1.

Question 7

1. What is a contingent liability? 
2. When must a contingent liability be recorded through a journal entry ? 
3. When should a contingent liability be disclosed in the footnotes to the financial statements ?
4. When is disclosure of a contingent liability not required?

Accepted Answer

The answer of 1. What is a contingent liability? 
2....

Question 8

A company's quick ratio:

Accepted Answer

A)  can never be larger than its current ratio at the same date. 
B)  indicates the length of time the company takes to pay its short-term creditors. 
C)  indicates how quickly the company converts its current assets to cash. 
D)  is computed by dividing current assets by current liabilities, excluding accounts payable for inventory purchases.

Question 9

Kristen's grandmother promises to give her $1,000 at the end of five years. How much is the money worth today, assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar).

Accepted Answer

A)  $747 
B)  $1,338 
C)  $4,212 
D)  $5,637

Question 10

Agracon Foods distributes coupons to consumers which may be presented, on or before a stated expiry date, to grocery stores for discounts on certain Agracon products. The stores are reimbursed when they send the coupons to Agracon. In Agracon's experience, only about 50% of these coupons are redeemed. During 2011, Argracon issued two separate series of coupons as follows: $$\begin{array} { | l | r | l | r | } 
\hline&&& \text { Amounts Reimbursed as of }\
 \text { Issued On } & \text { Total Value } & \text { Coupon Expiry Date } &\operatorname{Dec} 3120X1\\ \
 \hline \text { Jan 120X1 } & \$ 250,000 & \text { Jun 30 20X1 } & \$ 118,000 \
\hline \text { Oct 120X1 } & \$ 360,000 & \text { Mar 3120X2 } &\$150,000\
\hline
\end{array}$$ Agracon's only journal entries for 20X1 recorded debits to coupon expense, and credits to cash of $268,000. Their December 31, 20X1 balance sheet should include a provision for unredeemed coupons of:

Accepted Answer

A)  $180,000 
B)  $62,000 
C)  $30,000 
D)  $0

Question 11

Which of the following most likely would be classiﬁed as a current liability?

Accepted Answer

A)  Dividends payable 
B)  Bonds payable 
C)  Three-year notes payable 
D)  Mortgage payable

Question 12

The trade payables turnover ratio shows how quickly management is paying its trade creditors and is considered to be a measure of liquidity.

Accepted Answer

A) True 
 B)False

Question 13

On the company's 20X0 year-end statement of ﬁnancial position, the liability related to this note should be reported as which of the following?

Accepted Answer

A)  A $12,480 long-term liability. 
B)  A $12,480 current liability. 
C)  A $12,000 long-term liability. 
D)  A $12,000 current liability.

Question 14

A company that sells primarily on a cash basis could support a lower quick ratio because their cash inﬂow is faster than a company selling on credit.

Accepted Answer

A) True 
 B)False

Question 15

An annuity is a series of consecutive payments, each one increasing by a ﬁxed dollar amount over the payment amount of the prior year.

Accepted Answer

A) True 
 B)False

Question 16

The trade payables turnover ratio tests how quickly our credit customers pay their bills.

Accepted Answer

A) True 
 B)False

Question 17

Contingencies are disclosed in a note if it is probable that cash of other assets will be required to settle the obligation, or if the amount of the obligation cannot be measured with suﬃcient reliability.

Accepted Answer

A) True 
 B)False

Question 18

All contingent liabilities should be classiﬁed as either current or long-term liabilities on the statement of ﬁnancial position for the current period.

Accepted Answer

A) True 
 B)False

Question 19

The balance in the Future Income Tax Asset account always will reverse or "turn around" over a period of one or more future periods if no new differences originate.

Accepted Answer

A) True 
 B)False

Question 20

Jake Company is involved in a lawsuit. The liability which could arise as a result of this lawsuit should be recorded on the books if the probability of Jake owing money as a result of the lawsuit is which of the following?

Accepted Answer

A)  Remote and the amount can be reasonably estimated. 
B)  Probable and the amount cannot be reasonably estimated. 
C)  Reasonably possible and the amount can be reasonably estimated. 
D)  Probable and the amount can be reasonably estimated.

Exam 9: Long-Lived Tangible and Intangible Assets

The journal entry required on the company's books to record the note payable on July 1, 20X0 would include which of the following?

In 20X3, C Co reported a trade payables turnover ratio of 1.85 and a current ratio of 0.66. Their statement of ﬁnancial position shows $2.1 billion in marketable securities not included in their current assets and cash ﬂow from operations. Which of the following interpretations is most likely?

Purchase of inventory for cash will:

There is a reciprocal relationship between which of the following?

1. What is a contingent liability? 2. When must a contingent liability be recorded through a journal entry ? 3. When should a contingent liability be disclosed in the footnotes to the financial statements ? 4. When is disclosure of a contingent liability not required?

A company's quick ratio:

Kristen's grandmother promises to give her $1,000 at the end of five years. How much is the money worth today, assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar) .

Which of the following most likely would be classiﬁed as a current liability?

The trade payables turnover ratio shows how quickly management is paying its trade creditors and is considered to be a measure of liquidity.

On the company's 20X0 year-end statement of ﬁnancial position, the liability related to this note should be reported as which of the following?

A company that sells primarily on a cash basis could support a lower quick ratio because their cash inﬂow is faster than a company selling on credit.

An annuity is a series of consecutive payments, each one increasing by a ﬁxed dollar amount over the payment amount of the prior year.

The trade payables turnover ratio tests how quickly our credit customers pay their bills.

Contingencies are disclosed in a note if it is probable that cash of other assets will be required to settle the obligation, or if the amount of the obligation cannot be measured with suﬃcient reliability.

All contingent liabilities should be classiﬁed as either current or long-term liabilities on the statement of ﬁnancial position for the current period.

The balance in the Future Income Tax Asset account always will reverse or "turn around" over a period of one or more future periods if no new differences originate.

Jake Company is involved in a lawsuit. The liability which could arise as a result of this lawsuit should be recorded on the books if the probability of Jake owing money as a result of the lawsuit is which of the following?