Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Prepare journal entries without explanations for the following transactions involving notes payable for Gomez Company,whose fiscal year ends June 30.

Accepted Answer

The answer of Prepare journal entries without explanations for the...

Question 3

The days' payable is the number of times,on average,that accounts payable are paid in an accounting period.

Accepted Answer

A) True 
 B)False

Question 4

To determine the payables turnover,one first calculates the days' payable.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true regarding the time value of money?

Accepted Answer

A)  Compound interest will produce equal amounts of interest each period on a fixed deposit. 
B)  Earning simple interest is more beneficial than earning compound interest. 
C)  When making a purchase,it is better to make payment as soon as possible. 
D)  It is better to receive $1 now than a year from now.

Question 6

Use this information to answer the following question. The transactions below pertain to Bolivar Company,whose fiscal year ends September 30.
 The September 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Accepted Answer

A)  Interest Expense 329
Cash 329 
B)  Cash 329
Interest Expense 329 
C)  Interest Expense 329
Interest Payable 329 
D)  Interest Expense 329
Notes Payable 329

Question 7

Liabilities generally arise from future transactions.

Accepted Answer

A) True 
 B)False

Question 8

The cost approach to the measurement of fair value is based on the amount that currently would be required to replace an asset with the same or a comparable asset.

Accepted Answer

A) True 
 B)False

Question 9

The annual interest earned on an amount deposited into a bank account will increase each year when simple interest is used.

Accepted Answer

A) True 
 B)False

Question 10

A liability is recognized when

Accepted Answer

A)  the exact due date is known. 
B)  it is paid for. 
C)  an obligation has arisen. 
D)  the exact amount of the liability is known.

Question 11

During July,Audio City sold 200 radios for $50 each.Each radio had cost Audio City $30 to purchase and carried a two-year warranty.If 5 percent typically need to be replaced over the warranty period and one actually is replaced during July,the entry to record the Product Warranty Expense is:

Accepted Answer

A)  Product Warranty Expense 30
Estimated Product Warranty Liability 30 
B)  Product Warranty Expense 150
Cash 150 
C)  Product Warranty Expense 300
Estimated Product Warranty Liability 300 
D)  Estimated Product Warranty Liability 600
Product Warranty Expense 600

Question 12

Carroll Company has current assets of $230,000 and current liabilities of $150,000 of which accounts payable are $130,000.Arnold's cost of goods sold is $840,000,its merchandise inventory increased by $40,000,and accounts payable were $90,000 the prior year.Calculate Ronald's working capital,current ratio,payables turnover,and days' payable.

Accepted Answer

The answer of Carroll Company has current assets of $230,000...

Question 13

Which of the following most likely is an example of an accrued liability?

Accepted Answer

A)  Interest payable 
B)  Accounts payable 
C)  Long-term debt 
D)  Sales tax payable

Question 14

A company enters into a contract to purchase a certain quantity of goods from another company during the following month.At this point,would a liability exist? Explain why or why not.

Accepted Answer

The answer of A company enters into a contract to...

Question 15

A contingent liability always becomes a true liability.

Accepted Answer

A) True 
 B)False

Question 16

The market approach to the measurement of fair value converts future cash flows to a single present value.

Accepted Answer

A) True 
 B)False

Question 17

Match each definition with the correct term below.
-Estimated liabilities

Accepted Answer

A) Definite debts or obligations whose exact dollar amount cannot be known until a later date. 
B) Liabilities due beyond one year or beyond the normal operating cycle. 
C) Unsecured loans that are sold to the public ,usually through professionally managed investment firms. 
D) The cost of using money for a specific period. 
E) A potential liability that depends on a future event arising out of a past transaction.
F)Debts and obligations that a company expects to satisfy within one year or within its normal operating cycle.
G)The interest cost for two or more periods when,after each period,the interest earned in that period is added to the amount on which interest is calculated in future periods.
H)A legal obligation that does not meet the technical requirements for recognition as a liability.
I)A person who is not an employee of the organization and so is not accounted for under the payroll system.
J)The interest cost for one or more periods when the principal sum stays the same from period to period.

Question 18

Packett Company allows each employee two weeks' paid vacation after the employee has worked at the company for one year.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 $300,000.Compute the vacation pay expense for the month assuming 50 working weeks a year.Show your computation.

Accepted Answer

The answer of Packett Company allows each employee two weeks'...

Question 19

Total payroll for a given week is $24,000.If 70 percent of the company's employees typically qualify to receive two weeks' paid vacation per year,assuming 50 working weeks,the entry to record the estimated liability for vacation pay for the week is:

Accepted Answer

A)  Estimated Liability for Vacation Pay 1,680
Cash 1,680 
B)  Vacation Pay Expense 960
Cash 960 
C)  Vacation Pay Expense 672
Estimated Liability for Vacation Pay 672 
D)  Cash 336
Estimated Liability for Vacation Pay 336

Question 20

Property Taxes Expense is recorded only in the month it is paid.

Accepted Answer

A) True 
 B)False

Exam 9: Current Liabilities and Fair Value Accounting

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

Prepare journal entries without explanations for the following transactions involving notes payable for Gomez Company,whose fiscal year ends June 30.

The days' payable is the number of times,on average,that accounts payable are paid in an accounting period.

To determine the payables turnover,one first calculates the days' payable.

Which of the following statements is true regarding the time value of money?

Use this information to answer the following question. The transactions below pertain to Bolivar Company,whose fiscal year ends September 30. The September 30 adjusting entry,rounded to the nearest dollar,to accrue the interest expense on the note payable is:

Liabilities generally arise from future transactions.

The cost approach to the measurement of fair value is based on the amount that currently would be required to replace an asset with the same or a comparable asset.

The annual interest earned on an amount deposited into a bank account will increase each year when simple interest is used.

A liability is recognized when

During July,Audio City sold 200 radios for $50 each.Each radio had cost Audio City $30 to purchase and carried a two-year warranty.If 5 percent typically need to be replaced over the warranty period and one actually is replaced during July,the entry to record the Product Warranty Expense is:

Which of the following most likely is an example of an accrued liability?

A company enters into a contract to purchase a certain quantity of goods from another company during the following month.At this point,would a liability exist? Explain why or why not.

A contingent liability always becomes a true liability.

The market approach to the measurement of fair value converts future cash flows to a single present value.

Match each definition with the correct term below. -Estimated liabilities

Total payroll for a given week is $24,000.If 70 percent of the company's employees typically qualify to receive two weeks' paid vacation per year,assuming 50 working weeks,the entry to record the estimated liability for vacation pay for the week is:

Property Taxes Expense is recorded only in the month it is paid.