ACCT 302 ch. 13

-Trade notes payable, -Short-term zero-interest-bearing notes payable, -The discount on short-term notes payable

Which of the following should not be included in the current liabilities section of the balance sheet?

Selling magazine subscriptions.

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

FICA taxes withheld from employees' payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.

Which of the following statements is false?

State unemployment taxes.

Which of the following taxes does not represent a common employee payroll deduction?

Probable.

Which of the following terms is associated with recording a contingent liability?

Federal income taxes

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

To assist in understanding the entity's liquidity.

Why is the liability section of the balance sheet of primary importance to bankers?

stated value.

The face value of bonds is also called each of the following except

Liquidation of current liabilities is reasonably expected within the company's operating cycle (or one year if less).

What is the relationship between current liabilities and a company's operating cycle?

When the future events are probable to occur and the amount can be reasonably estimated.

When is a contingent liability recorded?

Expensed based on estimate in year of sale.

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

-Environmental liabilities that cannot be reasonably estimated -Risk of damage of enterprise property by explosion -Probable losses not reasonably estimable

Which of the following contingencies need not be disclosed in the financial statements or the related notes?

-Payment is probable. -Employee rights vest or accumulate. -Amount can be reasonably estimated.

Which of the following gives rise to the requirement to accrue a liability for the cost of compensated absences?

-A cash dividend payable to preferred stockholders.

Which of the following is a current liability?

Obligations related to product warranties.

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

The Discount on Notes Payable account should be reported as an asset on the balance sheet.

Which of the following is not true about the discount on short-term notes payable?

As a disclosure only.

Which of the following is the proper way to report some gain contingencies?

-Withheld Income Taxes, -Deposits Received from Customers, -Deferred Revenue

Which of the following may be a current liability?

Liabilities are

obligations arising from past transactions and payable in assets or services in the future.

An existing situation where uncertainty exists as to possible gain or loss that will be resolved when one or more future events occur or fail to occur.

What is a contingency?

The discount represents the cost of borrowing.

What is a discount as it relates to zero-interest-bearing notes payable?

Paid time off.

What are compensated absences?

Disclose the amount of the dividends in arrears.

A company has not declared a dividend on its cumulative preferred stock for the past three years. What is the required accounting treatment or disclosure in this situation?

whether it hires another party to perform the retirement activities or performs the activities itself.

A company is legally obligated for the costs associated with the retirement of a long-lived asset

is the result of a loss contingency.

A contingent liability

gain by the debtor and a loss by the creditor.

A troubled debt restructuring will generally result in a

current liabilities.

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

portion of FICA taxes and any union dues.

An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's

face amount of the bonds multiplied by the stated interest rate.

Bond interest paid is equal to the

recognized equally over the warranty period.

In a service-type warranty, warranty revenue is

a gain on the restructuring.

In a troubled debt restructuring in which the debt is restructured by a transfer of assets with a fair value less than the carrying amount of the debt, the debtor would recognize

the minimum of the range.

Martinez Co. has a loss contingency to accrue. The loss amount 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 amount of loss accrual should be

mortgages payable

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

the nominal rate of interest exceeded the market rate.

Reich, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that

none of these: -multiply $7920 by the table value for 10 periods and 8% from the present value of an annuity table. -multiply $7920 by the table value for 20 periods and 4% from the present value of an annuity table. -multiply $7920 by the table value for 20 periods and 3% from the present value of an annuity table

Sheridan Company issued $99000 of ten-year, 8% bonds that pay interest semiannually. The bonds are sold to yield 6%. Another step in calculating the issue price of the bonds is to

balance sheet as an item of stockholders' equity.

Stock dividends distributable should be classified on the

a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption

The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as

coupon rate, nominal rate, or stated rate.

The interest rate written in the terms of the bond indenture is known as the

effective rate.

The rate of interest actually earned by bondholders is called the

debenture bonds.

The term used for bonds that are unsecured as to principal is

included in the carrying amount of the related long-lived asset.

To record an asset retirement obligation (ARO), the cost associated with the ARO is

the market rate multiplied by the beginning-of-period carrying amount of the bonds.

Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to

20 periods and 3% from the present value of 1 table

Vaughn Manufacturing issued $118000 of ten-year, 8% bonds that pay interest semiannually. The bonds are sold to yield 6%. One step in calculating the issue price of the bonds is to multiply the face value by the table value for