Chapter 13

Which of the following situations may give rise to unearned revenue?

Selling magazine subscriptions

Of the following items, the only one which should not be classified as a current liability is

Short-term obligations expected to be refinanced on a long-term basis

Neer Co. has a probable loss that can only be reasonably estimated within a range of outcomes. No single amount within the range is a better estimate than any other amount. The loss accrual should be

the minimum of the range

A company gives each of its 75 employees (assume they were all employed continuously through 2017 and 2018) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2017, they made $21 per hour and in 2018 they made $24 per hour. During 2018, they took an average of 9 days of vacation each. The company's policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2017 and 2018 balance sheets, respectively?

$151,200 and $216,000

Excom manufactures high-end whole home electronic systems. The company provides a one-year warranty for all products sold. The company estimates that the warranty cost is $300 per unit sold and reported a liability for estimated warranty costs $10.4 million at the beginning of this year. If during the current year, the company sold 60,000 units for a total of $324 million and paid warranty claims of $12,000,000 on current and prior year sales, what amount of liability would the company report on its balance sheet at the end of the current year?

$16,400,000

Which of the following is not a correct statement about sales taxes?

Sales taxes are an expense of the seller

Bargain Surplus made cash sales during the month of October of $375,000. The sales are subject to a 6% sales tax that was also collected. Which of the following would be included in the summary journal entry to reflect the sale transactions?

Credit Sales Tax Payable for $22,500

Among the short-term obligations of Larsen Company as of December 31, the balance sheet date, are notes payable totaling $250,000 with the Dennison National Bank. These are 90-day notes, renewable for another 90-day period. These notes should be classified on the balance sheet of Larsen Company as

Current Liabilities

Which of the following best describes the accounting for assurance-type warranty costs?

Expensed based on estimate in year of sale

Which of these is not included in an employer's payroll tax expense?

Federal income taxes

Which of the following is a characteristic of a current liability but not a long-term liability?

Liquidation is reasonably expected to require use of existing resources classified as current assets or create other current liabilities

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

Obligations related to product warranties

A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should

be accrued during the period when earned

Greeson Corp. signed a three-month, zero-interest-bearing note on November 1, 2017 for the purchase of $500,000 of inventory. The face value of the note was $507,800. Greeson used a "Discount of Note Payable" account to initially record the note. Assuming that the discount will be amortized equally over the 3-month period and that there was no adjusting entry made for November, the adjusting entry made at December 31, 2017 will include a

debit to Interest Expense for $5,200

In a service-type warranty, warranty revenue is

recognized equally over the warranty period