Question 1

Match each of the following terms pertaining to liabilities to their definitions.
-The portion of a long-term liability that will be paid within one year of the balance sheet date.

Accepted Answer

A) Current liability 
B) Accounts payable 
C) Notes payable 
D) Discount on notes payable 
E) Current maturities of long-term liabilities
F)Accrued liabilities
G)Contingent liability
H)Estimated liability

Question 2

On November 1, Greenfield Corporation borrowed $55,000 from a bank and signed a 12%, 90-day note payable in the amount of $55,000.If you assume 360 days in year, the November 30 adjusting entry will be:

Accepted Answer

A)  Debit Interest Expense $550 and credit Cash $550. 
B)  Debit Discount on Notes Payable $1,100 and credit Interest Payable $1,100. 
C)  Debit Interest Expense $550 and credit Interest Payable $550. 
D)  Debit Interest Expense $550 and credit Notes Payable $550.

Question 3

Match each of the following terms related to interest and time value of money calculations to their appropriate definition.
-Interest calculated on the principal plus previous amounts of interest accumulated.

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

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.
-Salaries and wages payable

Accepted Answer

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

Question 5

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 6

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 7

The terms referring to contingencies differ between U.S.GAAP and IFRS.

Accepted Answer

A) True 
 B)False

Question 8

Cole Company had the following accounts and balances on December 31, 2016: $\begin{array}{lr}
\text { Income Taxes Payable } & \$ 51,250 \
\text { Cash } & 20,000 \
\text { Notes Payable, 10\%, due June 2, } 2017 & 1,000 \
\text { Accounts Receivable } & 267,500 \
\text { Equipment } & 950,000 \
\text { Accounts Payable } & 104,400 \
\text { Inventory } & 85,000 \
\text { Land } & 600,000\
\text { Allowance for Doubtful Accounts } & 12,000 \
\text { Discount on Notes Payable } & 150 \
\text { Notes Receivable, maturity } 2 / 1 / 2023 & 5,000 \
\text { Current Maturities of Long-Term Debt } & 6,900 \
\text { Unearned Revenue } & 4,320 \
\text { Interest Payable } & 1,010 \
\text { Wages Payable } & 6,000 \
\text { Marketable Securities } & 40,000 \
\text { Capital Stock } & 900,000\
\end{array}$ Required:
1.Compute Cole's working capital.
2.Compute Cole's current ratio.What does this ratio indicate about Cole's condition?

Accepted Answer

The answer of Cole Company had the following accounts and...

Question 9

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 10

If a 12% interest rate is compounded quarterly for 3 years, then there would be __________________________ compounding periods.

Accepted Answer

The answer of If a 12% interest rate is compounded...

Question 11

To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation?

Accepted Answer

A)  The future value of a single amount. 
B)  The present value of a single amount. 
C)  The future value of an annuity. 
D)  The present value of an annuity.

Question 12

All of the following statements about current liabilities are true except:

Accepted Answer

A)  Current liabilities are obligations which will be satisfied within one year. 
B)  Current liabilities are normally recorded at face value . 
C)  The current liability section never contains any portion of long-term liabilities. 
D)  Current liabilities finance the working capital of the company.

Question 13

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?

Accepted Answer

A)  6 
B)  8 
C)  10 
D)  12

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. To calculate the future value of an amount that is invested at 12%, compounded quarterly, at the end of three years, the interest factor used would be

Accepted Answer

A)  1% for 12 periods 
B)  3% for four periods 
C)  3% for 12 periods 
D)  12% for three periods

Question 15

The total amount of simple interest calculated annually on a $4,000 note payable in 5 years at 9% is:

Accepted Answer

A)  $1,800.00 
B)  $1,411.20 
C)  $2,154.60 
D)  $554.04

Question 16

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory.If current liabilities are $14,350, then the quick ratio would be

Accepted Answer

A)  5.0 to 1 
B)  2.6 to 1 
C)  2.0 to 1 
D)  1.2 to 1

Question 17

Match each of the following terms pertaining to liabilities to their definitions.
-Accounts that will be satisfied within one year or the next operating cycle.

Accepted Answer

A) Current liability 
B) Accounts payable 
C) Notes payable 
D) Discount on notes payable 
E) Current maturities of long-term liabilities
F)Accrued liabilities
G)Contingent liability
H)Estimated liability

Question 18

When borrowing money to be repaid in regular future payments, the payment is based on the present value of the loan, the interest rate and the length of the loan.

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, 2016 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

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.

Accepted Answer

A) True 
 B)False

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

Match each of the following terms pertaining to liabilities to their definitions. -The portion of a long-term liability that will be paid within one year of the balance sheet date.

On November 1, Greenfield Corporation borrowed $55,000 from a bank and signed a 12%, 90-day note payable in the amount of $55,000.If you assume 360 days in year, the November 30 adjusting entry will be:

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -Interest calculated on the principal plus previous amounts of interest accumulated.

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

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

The terms referring to contingencies differ between U.S.GAAP and IFRS.

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.

If a 12% interest rate is compounded quarterly for 3 years, then there would be __________________________ compounding periods.

To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation?

All of the following statements about current liabilities are true except:

The total amount of simple interest calculated annually on a $4,000 note payable in 5 years at 9% is:

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory.If current liabilities are $14,350, then the quick ratio would be

Match each of the following terms pertaining to liabilities to their definitions. -Accounts that will be satisfied within one year or the next operating cycle.

When borrowing money to be repaid in regular future payments, the payment is based on the present value of the loan, the interest rate and the length of the loan.

Identify the classifications of the following accounts as either current or long-term liabilities for the December 31, 2016 balance sheet. -An amount of money owed to the federal government based on the company's annual income.

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.