Question 1

Expense for a quality-assurance warranty is recorded along with the related liability in the reporting period in which the product under warranty is sold.

Accepted Answer

A) True 
 B)False

Question 2

A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:

Accepted Answer

A)  More likely than not and the amount of the loss is known.
B)  At least reasonably possible and the amount of the loss is known.
C)  At least reasonably possible and the amount of the loss can be reasonably estimated.
D)  Probable and the amount of the loss can be reasonably estimated.E) B) and C)
F) None of the above

Question 3

On September 1,2016,Hiker Shoes issued a $100,000,8-month,noninterest-bearing note.The loan was made by Second Commercial Bank where the stated discount rate is 9%.Hiker's effective interest rate on this loan (rounded) is:

Accepted Answer

A)  9.0%.
B)  9.5%.
C)  9.6%.
D)  9.7%.E) None of the above
F) A) and D)

Question 4

Other things being equal,most managers would prefer to report liabilities as noncurrent rather than current.The logic behind this preference is that the long-term classification permits the company to report:

Accepted Answer

A)  Higher working capital and a higher inventory turnover.
B)  Lower working capital and a higher current ratio.
C)  Higher working capital and a higher current ratio.
D)  Higher working capital and a lower debt to equity ratio.E) A) and B)
F) All of the above

Question 5

A quality-assurance warranty typically results in the seller:

Accepted Answer

A)  Accruing an expense for anticipated warranty costs at the time the warrantied product is sold.
B)  Recognizing an asset for accrued warranty costs which is amortized over the life of the warranty.
C)  Recognizing revenue over the life of the extended warranty.
D)  Refunding warranty payments upon expiration of the warranty.E) A) and B)
F) A) and D)

Question 6

What is the rebate promotion liability that Holyoak should report in its December 31,2016,balance sheet?

Accepted Answer

A)  $20,000.
B)  $28,000.
C)  $18,000.
D)  $19,000.E) A) and B)
F) B) and C)

Question 7

Which of the following is the best definition of a current liability?

Accepted Answer

A)  An obligation payable within one year.
B)  An obligation payable within one year of the balance sheet date.
C)  An obligation payable within one year or within the normal operating cycle,whichever is longer.
D)  An obligation expected to be satisfied with current assets or by the creation of other current liabilities.E) B) and D)
F) None of the above

Question 8

When cash is received from customers in the form of a refundable deposit,the cash account is increased with a corresponding increase in:

Accepted Answer

A)  A current liability.
B)  Revenue.
C)  Shareholders' equity.
D)  Paid-in capital.E) A) and C)
F) B) and C)

Question 9

As part of a promotion campaign,Funzy Cereal includes one coupon in each issue of various national magazines and offers a toy car in exchange for $1.00 and three coupons.The cars cost Funzy $1.50 each.Experience indicates that 4% of the coupons eventually will be redeemed.During the last month of 2013,the first month of the offer,12 million coupons were distributed and 240,000 million of the coupons were redeemed.What amount should Funzy report as a promotional expense for coupons on its December 31,2013,income statement?

Accepted Answer

A)  $ 0.
B)  $ 40,000.
C)  $ 80,000.
D)  $120,000.E) B) and C)
F) A) and B)

Question 10

A loss contingency should be accrued in a company's financial statements only if the likelihood that a liability has been incurred is:

Accepted Answer

A)  At least remotely possible and the amount of the loss is known.
B)  Reasonably possible and the amount of the loss is known.
C)  Reasonably possible and the amount of the loss can be reasonably estimated.
D)  Probable and the amount of the loss can be reasonably estimated.E) None of the above
F) B) and C)

Question 11

The most common type of liability is:

Accepted Answer

A)  One that comes into existence due to a loss contingency.
B)  One that must be estimated.
C)  One that comes into existence due to a gain contingency.
D)  One to be paid in cash and for which the amount and timing are known.E) B) and C)
F) None of the above

Question 12

The rate of interest printed on the face of a note payable is called the:

Accepted Answer

A)  Yield rate.
B)  Effective rate.
C)  Market rate.
D)  Stated rate.E) None of the above
F) A) and B)

Question 13

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Accepted Answer

The answer of Listed below are five terms followed by...

Question 14

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Accepted Answer

The answer of Listed below are five terms followed by...

Question 15

Which of the following is true about the initial journal entry used to record quality-assurance warranties?

Accepted Answer

The answer of Which of the following is true about...

Question 16

A liability for an unasserted claim must be accrued if it is reasonably possible that the claim will be asserted.

Accepted Answer

A) True 
 B)False

Exam 13: Current Liabilities and Contingencies

Other things being equal,most managers would prefer to report liabilities as noncurrent rather than current.The logic behind this preference is that the long-term classification permits the company to report:

Correct Answer
verified

The rate of interest printed on the face of a note payable is called the:

Correct Answer
verified

Which of the following is the best definition of a current liability?

Correct Answer
verified

A quality-assurance warranty typically results in the seller:

Correct Answer
verified

A liability for an unasserted claim must be accrued if it is reasonably possible that the claim will be asserted.

Correct Answer
verified

A loss contingency should be accrued in a company's financial statements only if the likelihood that a liability has been incurred is:

Correct Answer
verified

The most common type of liability is:

Correct Answer
verified

Which of the following is true about the initial journal entry used to record quality-assurance warranties?

Correct Answer
verified

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Correct Answer
verified

Expense for a quality-assurance warranty is recorded along with the related liability in the reporting period in which the product under warranty is sold.

Correct Answer
verified

What is the rebate promotion liability that Holyoak should report in its December 31,2016,balance sheet?

Correct Answer
verified

On September 1,2016,Hiker Shoes issued a $100,000,8-month,noninterest-bearing note.The loan was made by Second Commercial Bank where the stated discount rate is 9%.Hiker's effective interest rate on this loan (rounded) is:

Correct Answer
verified

When cash is received from customers in the form of a refundable deposit,the cash account is increased with a corresponding increase in:

Correct Answer
verified

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Correct Answer
verified

Correct Answer
verified

A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:

Correct Answer
verified

Exam 13: Current Liabilities and Contingencies

Other things being equal,most managers would prefer to report liabilities as noncurrent rather than current.The logic behind this preference is that the long-term classification permits the company to report:

Correct AnswerverifiedShow Answer

The rate of interest printed on the face of a note payable is called the:

Correct AnswerverifiedShow Answer

Which of the following is the best definition of a current liability?

Correct AnswerverifiedShow Answer

A quality-assurance warranty typically results in the seller:

Correct AnswerverifiedShow Answer

A liability for an unasserted claim must be accrued if it is reasonably possible that the claim will be asserted.

Correct AnswerverifiedShow Answer

A loss contingency should be accrued in a company's financial statements only if the likelihood that a liability has been incurred is:

Correct AnswerverifiedShow Answer

The most common type of liability is:

Correct AnswerverifiedShow Answer

Which of the following is true about the initial journal entry used to record quality-assurance warranties?

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Correct AnswerverifiedShow Answer

Expense for a quality-assurance warranty is recorded along with the related liability in the reporting period in which the product under warranty is sold.

Correct AnswerverifiedShow Answer

What is the rebate promotion liability that Holyoak should report in its December 31,2016,balance sheet?

Correct AnswerverifiedShow Answer

On September 1,2016,Hiker Shoes issued a $100,000,8-month,noninterest-bearing note.The loan was made by Second Commercial Bank where the stated discount rate is 9%.Hiker's effective interest rate on this loan (rounded) is:

Correct AnswerverifiedShow Answer

When cash is received from customers in the form of a refundable deposit,the cash account is increased with a corresponding increase in:

Correct AnswerverifiedShow Answer

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:

Correct AnswerverifiedShow Answer

Correct Answer
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