FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Current Liabilities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Ogden Motors, Inc. is involved in a lawsuit. It is reasonably possible that the jury will find in favor of the plaintiff and Ogden will owe ten million dollars. What is the appropriate reporting of this lawsuit and what is the effect on the balance sheet?

A) Record; decrease stockholders' equity and increase liabilities.
B) Record; increase stockholders' equity and decrease liabilities.
C) Disclose; no effect on the balance sheet.
D) Disclose; decrease stockholders' equity and decrease liabilities.

E) C) and D)
F) B) and C)

Correct Answer

verified

Show Answer

Question 42

True/False

Review LaterAdd Note

Review Later

Accounts payable are amounts the company owes to suppliers of merchandise or services that it has bought on credit.

A) True
B) False

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Away Travel filed suit against West Coast Travel seeking damages for copyright violations. Away Travel's legal counsel believes it is probable (but not certain) that Away Travel will win the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Away Travel report this litigation?

The balance in the Warranty Liability account is always equal to Warranty Expense.

On November 1, 2012, The Bagel Factory signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2013. The Bagel Factory records the appropriate adjusting entry for the note on December 31, 2012. In recording the payment of the note plus accrued interest at maturity on May 1, 2013, The Bagel Factory would

On September 1, 2012, Allied Moving Corp. borrows $100,000 cash from First National Bank. Allied signs a six-month, 6% note payable. Interest is payable at maturity. Allied's year-end is December 31. 1. Record the note payable by Allied Moving Corp. 2. Record the appropriate adjusting entry for the note by Allied Moving Corp. on December 31, 2012. 3. Record the payment of the note at maturity.

Which of the following is not a liability?

When a company delivers a product or service for which a customer has previously paid, the company records the following:

On April 1, 2012, the Electronic Superstore borrows $22 million of which $4 million is due in 2013. Show how the company would report the $22 million debt on its December 31, 2012 balance sheet.

Talks-A-Lot, Inc. sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program. The average repair cost is $75 per phone. For 2012, Talks-A-Lot has sold 750 cell phones and has repaired 30 of them as of December 31, 2012. What amount of warranty liability should be reported at December 31, 2012?

If the likelihood of a loss is reasonably possible rather than probable, we record no entry, but make full disclosure in a footnote to the financial statements to describe the contingency.

Listed below are several terms and phrases associated with current liabilities. Pair each item in the first column (by number) with the item in the second column that is most appropriately associated with it.

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?

Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will the purchase of inventory with cash affect each ratio?

On December 1, 2012, Old World Deli signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2013. Old World Deli records the appropriate adjusting entry for the note on December 31, 2012. What amount of cash will be needed to pay back the note payable plus any accrued interest on June 1, 2013?

The Copper Grill has the following current assets: cash, $12 million; receivables, $50 million; inventory, $44 million; and other current assets $4 million. The Copper Grill has the following liabilities: accounts payable, $38 million; current portion of long-term debt, $7 million; and long-term debt, $12 million. Based on these amounts, calculate the current ratio and the acid-test ratio for The Copper Grill.

Volt Electronics sells equipment that includes a three-year warranty. Repairs under the warranty are performed by an independent service company under a contract with Volt. Based on prior experience, warranty costs are estimated to be $25 per item sold. Volt should recognize these warranty costs:

Retailers like McDonalds, American Eagle, and Apple Computer sell a large number of gift cards. Explain how these companies account for the sale of gift cards.

On November 1, 2012, New Morning Bakery signed a $200,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2013. New Morning Bakery should record which of the following adjusting entries at December 31, 2012?

Region Jet has a $50 million liability at December 31, 2012, of which $10 million is payable in 2013. In its December 31, 2012 balance sheet, the company reports the $50 million debt as