Question 1

A company gives a two-year warranty for its product.The estimated liability for product warranties for the upcoming year is a current liability.

Accepted Answer

A) True 
 B)False

Question 2

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.  
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Cory and Ginger want to buy an airplane.They find one that will cost $200,000.They must pay 10% down and can get the balance financed with a ten year loan at 7% interest and annual payments.What is their annual payment?

Accepted Answer

A) $26,826 
B) $25,626 
C) $24,457 
D) $19,260

Question 3

What are examples of accounts that might be classified as accrued liabilities in the Current Liabilities section of the balance sheet?

Accepted Answer

The answer of What are examples of accounts that might...

Question 4

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.  
-
The total amount of interest compounded quarterly on a $2,000 note payable for one year at 8% is

Accepted Answer

A) $164.86. 
B) $240.00. 
C) $40.00. 
D) None of these are correct.

Question 5

A contingent liability is recorded if it is probable and can be reasonably estimated.

Accepted Answer

A) True 
 B)False

Question 6

Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to

Accepted Answer

A) increase. 
B) decrease. 
C) be unchanged since the effects offset one another. 
D) be unchanged since it has no effect on any current accounts.

Question 7

An obligation that involves an existing condition for which the outcome is not known with certainty and depends on some event that will occur in the future is call a(n)__________.

Accepted Answer

The answer of An obligation that involves an existing condition...

Question 8

A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to

Accepted Answer

A) make an adjusting entry to reduce the amount of estimate. 
B) make a correcting entry because the overstatement is an error. 
C) show the amount of overstatement on the income statement as a loss. 
D) do nothing for the year in question and modify the next year's estimate.

Question 9

On May 1,Chris Company borrowed $30,000 from Third Street Bank on a one-year,6% note.If the company keeps its records on a calendar year,an entry is needed on December 31 to increase

Accepted Answer

A) interest expense by $600. 
B) interest expense by $1,800. 
C) interest payable by $900. 
D) interest payable by $1,200.

Question 10

If a company wishes to accumulate $500,000 in 20 years at 5% by making equal yearly deposits into an account,calculation of the deposits is an application of the

Accepted Answer

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

Question 11

Curtain Corp.stands to receive a sufficient cash settlement from a lawsuit.Curtain needs to record this on its accounting records.

Accepted Answer

A) True 
 B)False

Question 12

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.  
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The future value of equal semiannual payments of $500 at 8% compounded semiannually for four years is

Accepted Answer

A) $868. 
B) $2,000. 
C) $4,607. 
D) $9,320.

Question 13

If a bank discounts a note,then the borrower needs to only pay the cash received and not the face value of the note.

Accepted Answer

A) True 
 B)False

Question 14

Assume that you know the total dollar amount of a loan and the amount of the monthly payments.How can you determine the interest rate as a percentage of the loan?

Accepted Answer

The answer of Assume that you know the total dollar...

Question 15

The difference between notes payable and accounts payable is __________.

Accepted Answer

The answer of The difference between notes payable and accounts...

Question 16

Discount on Notes Payable is treated as a reduction of notes payable on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 17

Using the indirect method,an increase in accounts payable would be shown as a(n)__________ in the __________ Activities section of the statement of cash flows.

Accepted Answer

The answer of Using the indirect method,an increase in accounts...

Question 18

__________ include any amount that has been incurred due to the passage of time,but not paid as of the balance sheet date.

Accepted Answer

The answer of __________ include any amount that has been...

Question 19

There are very important differences between U.S.and international standards regarding contingencies.Even the terms used to refer to situations with unknown outcomes differ.Explain these differences.

Accepted Answer

The answer of There are very important differences between U.S.and...

Question 20

Which of the following is an example of a contingent liability?

Accepted Answer

A) A liability for notes payable with interest included in the face amount 
B) The liability for future warranty repairs on computers sold during the current period 
C) A lawsuit being threatened but not yet filed against a restaurant chain for improper preparation of food 
D) A corporate long-term employment contract with the chief executive officer

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

A company gives a two-year warranty for its product.The estimated liability for product warranties for the upcoming year is a current liability.

What are examples of accounts that might be classified as accrued liabilities in the Current Liabilities section of the balance sheet?

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. - The total amount of interest compounded quarterly on a $2,000 note payable for one year at 8% is

A contingent liability is recorded if it is probable and can be reasonably estimated.

Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to

An obligation that involves an existing condition for which the outcome is not known with certainty and depends on some event that will occur in the future is call a(n)__________.

A firm is required to estimate a liability for repairs for products sold with a warranty.If the firm's accountants later find that the estimated amount for repairs has been overstated,the correct accounting procedure is to

On May 1,Chris Company borrowed $30,000 from Third Street Bank on a one-year,6% note.If the company keeps its records on a calendar year,an entry is needed on December 31 to increase

If a company wishes to accumulate $500,000 in 20 years at 5% by making equal yearly deposits into an account,calculation of the deposits is an application of the

Curtain Corp.stands to receive a sufficient cash settlement from a lawsuit.Curtain needs to record this on its accounting records.

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. - The future value of equal semiannual payments of $500 at 8% compounded semiannually for four years is

If a bank discounts a note,then the borrower needs to only pay the cash received and not the face value of the note.

Assume that you know the total dollar amount of a loan and the amount of the monthly payments.How can you determine the interest rate as a percentage of the loan?

The difference between notes payable and accounts payable is __________.

Discount on Notes Payable is treated as a reduction of notes payable on the balance sheet.

Using the indirect method,an increase in accounts payable would be shown as a(n) in the Activities section of the statement of cash flows.

__________ include any amount that has been incurred due to the passage of time,but not paid as of the balance sheet date.

There are very important differences between U.S.and international standards regarding contingencies.Even the terms used to refer to situations with unknown outcomes differ.Explain these differences.

Which of the following is an example of a contingent liability?