Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

In 2017,Scranton,Inc.sold 2,000 carpets for $50 each.The carpets carry a two-year warranty for repairs.Scranton estimates that repair costs will average 3% of the total selling price.What amount would be recorded in the warranty liability account as a result of selling the carpets during 2017?

Accepted Answer

A) $1,500 
B) $3,000 
C) $50 
D) No liability should be recorded until the carpets are returned for repairs.

Question 3

If the market value that you paid for a car is known and the annual payment and number of payments is known,the table factor to help find the interest rate can be calculated by dividing __________.

Accepted Answer

The answer of If the market value that you paid...

Question 4

An amount that has been incurred as an expense,but has not yet been paid should be considered an accrued liability.

Accepted Answer

A) True 
 B)False

Question 5

On November 1,2017,Brownsville Co.borrowed $80,000 from State Bank and signed a 12%,six-month note payable,all due at maturity.The interest on this loan is stated separately.At December 31,2017,Brownsville Co.'s overall liability for this loan amounts to

Accepted Answer

A) $84,800. 
B) $80,000. 
C) $81,600. 
D) $83,200.

Question 6

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.  
-
Kingston inherited $140,000 from an aunt.If Kingston decides not to spend his inheritance but to leave the money in his savings account until he retires in 15 years,how much money will he have assuming an annual interest rate of 8%,compounded semiannually?

Accepted Answer

A) $308,000 
B) $509,880 
C) $454,020 
D) $7,851,900

Question 7

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 nine years,what compounded interest rate must she get on her money (assume annual compounding)?

Accepted Answer

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

Question 8

What is meant by the term current maturities of long-term debt in the Current Liabilities section of the balance sheet?

Accepted Answer

The answer of What is meant by the term current...

Question 9

The payment of accounts payable results in a(n)

Accepted Answer

A) decrease in liabilities and a decrease in assets. 
B) decrease in liabilities and an increase in assets. 
C) increase in liabilities and a decrease in owners' equity. 
D) decrease in liabilities and an increase in owners' equity.

Question 10

There are some liabilities,such as income tax payable,for which the amounts must be estimated.Failure to estimate these amounts and record them would be a violation of the

Accepted Answer

A) matching principle. 
B) convention of conservation. 
C) practice of consistency. 
D) concept of historical cost.

Question 11

If current assets amount to $150,total assets $350,current liabilities $65,and total liabilities $100,then the current ratio is

Accepted Answer

A) 2.12 to 1. 
B) 2.31 to 1. 
C) 3.03 to 1. 
D) 3.50 to 1.

Question 12

In a compound interest problem,if you know the future value,the present value,and the number of periods,then you can solve for the interest rate.

Accepted Answer

A) True 
 B)False

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.  
-
How much would have to be deposited in a savings account earning 6%,so that equal annual withdrawals of $200 can be made at the end of each of ten years? The balance at the end of the last year would be zero.

Accepted Answer

A) $528 
B) $1,472 
C) $2,000 
D) $2,636

Question 14

What type of interest is calculated on the balance of the principal only?

Accepted Answer

A) Equivalent interest 
B) Compound interest 
C) Future interest 
D) Simple interest

Question 15

All of the following statements about current liabilities are true except

Accepted Answer

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

Question 16

The total amount of simple interest calculated annually on a $6,000 note payable for three years at 11% is

Accepted Answer

A) $1,980. 
B) $2,205. 
C) $6,600. 
D) $7,980.

Question 17

Accountants need not worry about calculations based on the concept of the time value of money.

Accepted Answer

A) True 
 B)False

Question 18

When a company uses coupon or premium offers in conjunction with the sale of its products,there is no need to record any contingent liability.

Accepted Answer

A) True 
 B)False

Question 19

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. 
-
Denise wants to help pay for her niece's college tuition.Her niece will begin college in one year.How much would Denise need to put into a savings account today at 6% so that her niece can withdraw $10,000 per year for four years and reduce the account balance to zero at the end of the four years?

Accepted Answer

A) $31,680 
B) $34,650 
C) $37,600 
D) $37,720

Question 20

All of the following statements are true except

Accepted Answer

A) the threshold for recording items as liabilities is lower under IFRS than under U.S.GAAP. 
B) the threshold for recording items as liabilities is lower under U.S.GAAP than under IFRS. 
C) IFRS require a liability to be recorded as a present value amount. 
D) under U.S.GAAP,a contingent item should be recorded as a liability if the loss or outflow is probable and can be reasonably estimated.

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

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

In 2017,Scranton,Inc.sold 2,000 carpets for $50 each.The carpets carry a two-year warranty for repairs.Scranton estimates that repair costs will average 3% of the total selling price.What amount would be recorded in the warranty liability account as a result of selling the carpets during 2017?

If the market value that you paid for a car is known and the annual payment and number of payments is known,the table factor to help find the interest rate can be calculated by dividing __________.

An amount that has been incurred as an expense,but has not yet been paid should be considered an accrued liability.

On November 1,2017,Brownsville Co.borrowed $80,000 from State Bank and signed a 12%,six-month note payable,all due at maturity.The interest on this loan is stated separately.At December 31,2017,Brownsville Co.'s overall liability for this loan amounts to

What is meant by the term current maturities of long-term debt in the Current Liabilities section of the balance sheet?

The payment of accounts payable results in a(n)

There are some liabilities,such as income tax payable,for which the amounts must be estimated.Failure to estimate these amounts and record them would be a violation of the

If current assets amount to $150,total assets $350,current liabilities $65,and total liabilities $100,then the current ratio is

In a compound interest problem,if you know the future value,the present value,and the number of periods,then you can solve for the interest rate.

What type of interest is calculated on the balance of the principal only?

All of the following statements about current liabilities are true except

The total amount of simple interest calculated annually on a $6,000 note payable for three years at 11% is

Accountants need not worry about calculations based on the concept of the time value of money.

When a company uses coupon or premium offers in conjunction with the sale of its products,there is no need to record any contingent liability.

All of the following statements are true except