Question 1

The theoretical value of an asset is the present value of the expected benefits.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a contingent liability?

Accepted Answer

A)  Unearned revenues 
B)  Excise tax payable 
C)  Payroll liabilities 
D)  Disputed additional tax assessment

Question 3

Fabian Company is considering the purchase of a machine that will save the company $4,000 per year in operating costs for a period of 10 years.The most it should pay for the machine is equal to

Accepted Answer

A)  $4,000 times the present value of an ordinary annuity for 10 periods. 
B)  $40,000. 
C)  $4,000 divided by the future value of a single sum at the end of 10 periods. 
D)  $4,000 times the future value of an ordinary annuity for 10 periods.

Question 4

All factors in a present value of a single sum table are less than 1.000.

Accepted Answer

A) True 
 B)False

Question 5

The term wages refers to the compensation of employees who are paid at an hourly rate.

Accepted Answer

A) True 
 B)False

Question 6

An estimated liability is a definite obligation of the firm even though the amount cannot be definitely determined.

Accepted Answer

A) True 
 B)False

Question 7

Use this information to answer the following question. The following totals for the month of July were taken from the payroll register of Greene Company:
 The entry to record the accrual of employer's payroll taxes would include a debit to Payroll Taxes and Benefits Expense for

Accepted Answer

A)  $2,496. 
B)  $1,100. 
C)  $1,596. 
D)  $496.

Question 8

All of the following are measures of liquidity and cash flow except

Accepted Answer

A)  payables turnover. 
B)  return on assets. 
C)  the current ratio. 
D)  days' payable.

Question 9

Assume that a company received $2,400 in advance for one year membership fee in the fitness center.The entry that would be made to record the recognition of revenue at the end of first month is:

Accepted Answer

A)  Revenue 2,400
Cash 2,400 
B)  Cash 200
Revenue 200 
C)  Unearned revenue 200
Revenue 200 
D)  Revenue 200
Unearned revenue 200

Question 10

Commercial paper normally is issued by companies with poor credit ratings.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is most likely a definitely determinable liability during interim periods?

Accepted Answer

A)  Estimated property tax payable 
B)  Accrued interest payable 
C)  Estimated product warranty liability 
D)  Estimated income taxes payable

Question 12

A customer is injured using a company's product.The potential liability that may result is called a(n)

Accepted Answer

A)  contingent liability. 
B)  estimated liability. 
C)  definitely determinable liability. 
D)  estimated warranty liability.

Question 13

Purchase agreements are

Accepted Answer

A)  estimates. 
B)  commitments. 
C)  liabilities. 
D)  contingencies.

Question 14

Match each definition with the correct term below.
-Interest

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 15

A company purchases an asset on a deferred payment plan,ultimately paying $10,000.On the payment date,the company would

Accepted Answer

A)  credit Cash for less than $10,000. 
B)  debit Interest Expense for the imputed amount. 
C)  debit the asset account for $10,000. 
D)  debit Accounts Payable for $10,000.

Question 16

Because failure to record a liability generally leads to failure to record an expense,it usually results in an understatement of income.

Accepted Answer

A) True 
 B)False

Question 17

Calculate answers to the following questions using future value and/or present value tables.
a.Tally purchased machinery by executing a $30,000 non-interest-bearing note due in four years.For how much should the machinery be recorded,assuming that the going rate for similar notes is 6 percent?
b.Mindy Kwon is making bank deposits of $3,000 at the end of each year for five years,for purposes of buying a car.Assuming an interest rate of 7 percent,how expensive of a car will she be able to purchase?
c.To how much will $2,000 grow,assuming it is invested for 2-1/2 years,with interest of 8 percent,compounded quarterly?
d.Liz Astor would like to make a lump-sum deposit today so that she can withdraw $10,000 at the end of each year for the next three years.Assuming a 9 percent interest rate,what should she invest today?

Accepted Answer

The answer of Calculate answers to the following questions using...

Question 18

Holmes Company produces widgets that cost $120 each and have a 5 percent failure rate during the warranty period.If 500 widgets are sold,the entry to record the estimated product warranty expense would be

Accepted Answer

A)  Product Warranty Expense 600
Estimated Product Warranty Liability 600 
B)  Product Warranty Expense 3,000
Estimated Product Warranty Liability 3,000 
C)  Product Warranty Expense 300
Cash 300 
D)  Estimated Product Warranty Liability 150
Cash 150

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

There is no limit to the amount of income subject to the Medicare tax.

Accepted Answer

A) True 
 B)False

Exam 9: Current Liabilities and Fair Value Accounting

The theoretical value of an asset is the present value of the expected benefits.

Which of the following is a contingent liability?

Fabian Company is considering the purchase of a machine that will save the company $4,000 per year in operating costs for a period of 10 years.The most it should pay for the machine is equal to

All factors in a present value of a single sum table are less than 1.000.

The term wages refers to the compensation of employees who are paid at an hourly rate.

An estimated liability is a definite obligation of the firm even though the amount cannot be definitely determined.

Use this information to answer the following question. The following totals for the month of July were taken from the payroll register of Greene Company: The entry to record the accrual of employer's payroll taxes would include a debit to Payroll Taxes and Benefits Expense for

All of the following are measures of liquidity and cash flow except

Assume that a company received $2,400 in advance for one year membership fee in the fitness center.The entry that would be made to record the recognition of revenue at the end of first month is:

Commercial paper normally is issued by companies with poor credit ratings.

Which of the following is most likely a definitely determinable liability during interim periods?

A customer is injured using a company's product.The potential liability that may result is called a(n)

Purchase agreements are

Match each definition with the correct term below. -Interest

A company purchases an asset on a deferred payment plan,ultimately paying $10,000.On the payment date,the company would

Because failure to record a liability generally leads to failure to record an expense,it usually results in an understatement of income.

Holmes Company produces widgets that cost $120 each and have a 5 percent failure rate during the warranty period.If 500 widgets are sold,the entry to record the estimated product warranty expense would be

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

There is no limit to the amount of income subject to the Medicare tax.