chapter 13 current liabilities and contingencies.

Mikel Company grants stock options and bonuses to its full-time employees. These benefits are considered employee Blank______. Multiple choice question. loans compensation contingencies

compensation

When it is uncertain whether an obligation really exists, we may recognize what is referred to as a Multiple choice question. deferred asset. deferred revenue. contingent loss.

contingent loss.

Recognition of costs related to manufacturers' quality assurance warranty during the same period that the related revenue is recognized is consistent with the Multiple choice question. going concern concept revenue recognition principle full disclosure principle cost principle matching principle

matching principle

Current liabilities are those obligations that are payable within Blank______ or the operating cycle whichever is Blank______. Multiple choice question. one year; longer six month; longer one year; shorter six month; shorter

one year; longer

Current liabilities are those obligations that are payable within Blank______ or the operating cycle whichever is Blank______. Multiple choice question. six month; longer six month; shorter one year; shorter one year; longer

one year; longer

Which of the following are used to categorize the likelihood of the occurrence of a future loss? (Select all that apply.) Multiple select question. probable certain reasonably possible remote uncertain

probable reasonably possible remote

If a liability is classified as current, rather than noncurrent, the company's working capital will Blank______. Multiple choice question. decrease increase stay the same

decrease

Obligations to suppliers of merchandise and obligations for services purchased on open account are referred to as Multiple choice question. trade notes payable accounts payable secured loans credit lines

accounts payable

Events occurring between the end of the fiscal year and the date the financial statements are issued or available to be issued should be Multiple choice question. accrued if they represent a probable loss that can be reasonably estimated. considered to clarify financial statement elements at the reporting date. ignored because they occur in a subsequent accounting period.

considered to clarify financial statement elements at the reporting date.

Which of the following liabilities should be classified as current? (Select all that apply.) Multiple select question. A 6-month note that is due in December of the current year will be satisfied by signing a new 6-month note. A note that is due in December of the current year will be satisfied by signing a new 18-month note. An 18-month note that is due in December of the current year will be paid in full.

A 6-month note that is due in December of the current year will be satisfied by signing a new 6-month note. An 18-month note that is due in December of the current year will be paid in full.

Which of the following are essential characteristics of a liability? (Select all that apply.) Multiple select question. A future sacrifice of an economic benefit is probable. The future sacrifice arises from a present obligation. The future sacrifice is certain and can be reliably measured. The obligation results from a past event. The future sacrifice arises from a written contract.

A future sacrifice of an economic benefit is probable. The future sacrifice arises from a present obligation. The obligation results from a past event.

Wagner Company's financial records show that it has a mortgage that requires monthly principal payments of $3,000. The mortgage loan matures in 15 years. What should Wagner show on its balance sheet at the end of the current year? (Select all that apply.) Multiple select question. A noncurrent liability of $504,000 A current liability of $540,000 A current liability of $36,000 A noncurrent liability of $540,000

A noncurrent liability of $504,000 A current liability of $36,000

Which of the following transactions require the recognition of a liability? (Select all that apply.) Multiple select question. Collection of a refundable deposit from a customer. Placing a purchase order for inventory. Receipt of payment for a service performed next month.

Collection of a refundable deposit from a customer. Receipt of payment for a service performed next month.

Which of the following are common types of employee compensation? (Select all that apply.) Multiple select question. Employee loans Commissions Salaries Pensions

Commissions Salaries Pensions

Which of the following concepts or principles is the primary reason why gain contingencies are not accrued, even if they are probable? Multiple choice question. Conservatism Reliability Full disclosure Relevance

Conservatism

Newman Company has both a contingent gain and a contingent loss that it judges to be highly probable to result in future cash flows, which it is able to reasonably estimate. Which of the following should the company accrue for the current accounting period? Multiple choice question. Contingent gain only Both the contingent gain and loss Contingent loss only

Contingent loss only

Match the following risk levels with the type of liability it is most frequently associated with from the perspective of a potential investor or creditor. terms: Lower risk Higher risk description: Current liabilities already reported on balance sheet Noncurrent liabilities already reported on the balance sheet

Higher risk- Current liabilities already reported on balance sheet. Lower risk- Noncurrent liabilities already reported on the balance sheet

Which of the following are common examples of accrued liabilities? (Select all that apply) Multiple select question. Bonds payable Income tax payable Interest payable Short-term notes payable Wages and salaries payable

Income tax payable Interest payable Wages and salaries payable

Which of the following are common examples of accrued liabilities? (Select all that apply) Multiple select question. Interest payable Short-term notes payable Wages and salaries payable Bonds payable Income tax payable

Interest payable Wages and salaries payable Income tax payable

Match the terms with the correct description. terms: Reasonably possible Probable Remote Descriptions: The chance that the confirming event will occur is more than remote but less than likely Confirming event is likely to occur The chance that the confirming event will occur is slight

Probable- Confirming event is likely to occur Reasonably possible- The chance that the confirming event will occur is more than remote but less than likely Remote- The chance that the confirming event will occur is slight

Which of the following transactions will increase a company's working capital? Multiple choice question. Collection of an accounts receivable balance Payment of an accounts payable Receipt of cash on a long-term note Receipt of cash on a short-term note Purchase of inventory on account

Receipt of cash on a long-term note

Which of the following transactions will increase a company's working capital? Multiple choice question. Collection of an accounts receivable balance Receipt of cash on a short-term note Purchase of inventory on account Payment of an accounts payable Receipt of cash on a long-term note

Receipt of cash on a long-term note

Which of the following is correct regarding gain contingencies? Multiple choice question. They are not accrued. They are accrued if it is probable that a gain will be realized. They are accrued if it is possible that a gain will be realized.

They are not accrued.

Which of the following statements regarding commercial paper are correct? (Select all that apply.) Multiple select question. They are secured notes. They are unsecured notes. They have minimum denominations of $25,000. They are often purchased by other companies as investments. Their maturity periods range from 180-450 days.

They are unsecured notes. They have minimum denominations of $25,000. They are often purchased by other companies as investments.

Norbert Company recently signed a 20-year mortgage that requires monthly payments of principal and interest. Norbert should report the mortgage principal payments due during the following accounting period as Multiple choice question. a long-term liability either a short-term or long-term liability a current liability

a current liability

In practice, accrual of loss contingencies related to litigation claims are uncommon because (select all that apply) Multiple select question. it may positively affect the outcome of the litigation. it may adversely affect the outcome of the litigation. outcome related to litigation is easily estimated. the outcome related to litigation is highly uncertain.

it may adversely affect the outcome of the litigation. the outcome related to litigation is highly uncertain.

Taxes collected for taxing authorities are recognized as Multiple choice question. prepaid expenses. operating expenses. liabilities. revenue.

liabilities.

The feature that distinguishes loss contingencies from other liabilities is the Multiple choice question. certainty that a loss will occur. loss is determined based on past events. length of time the company will incur losses. uncertainty that a loss will occur.

uncertainty that a loss will occur.

Revenue associated with the sale of gift cards normally is recognized Multiple choice question. when the gift cards are redeemed evenly over the life of the gift card. when the gift cards are purchased

when the gift cards are redeemed

Information relative to a loss contingency that becomes available after the fiscal year ends, but before the financial statement date (select all that apply) Multiple select question. should be ignored since the information was not available until after the fiscal year end. should be considered in determining the probability of a loss contingency. should be considered in estimating the amount of the loss. cannot be considered in estimating the amount of loss because the information was not available until after year end.

should be considered in determining the probability of a loss contingency. should be considered in estimating the amount of the loss.

What practical reason may motivate companies to rarely accrue losses for ongoing litigation? Multiple choice question. Accrual of a contingent loss may adversely affect the outcome of the company's legal case. An actual loss is typically unlikely to occur. Accrual prior to actual final judgment is not permitted under GAAP.

Accrual of a contingent loss may adversely affect the outcome of the company's legal case.

Which of the following is correct regarding accrued interest payable? Multiple choice question. Accrued interest payable relates to interest already incurred but not yet paid. Accrued interest payable relates to interest that was prepaid but not yet incurred. Accrued interest payable relates to interest that was neither paid nor incurred.

Accrued interest payable relates to interest already incurred but not yet paid.

Which of the following represents the formal credit instrument for an accounts payable? Multiple choice question. Purchase order Commercial paper Promissory note Supplier's invoice

Supplier's invoice

Which of the following are essential characteristics of a liability? (Select all that apply.) Multiple select question. The future sacrifice arises from a present obligation. The future sacrifice is certain and can be reliably measured. The future sacrifice arises from a written contract. A future sacrifice of an economic benefit is probable. The obligation results from a past event.

The future sacrifice arises from a present obligation. A future sacrifice of an economic benefit is probable. The obligation results from a past event.

Which of the following represent an accrued liability? (Select all that apply.) Multiple select question. Unpaid interest relating to the past few months. Unpaid wages relating to the last few days in the current fiscal period just ended. Interest associated with a loan signed today. Insurance premiums paid for the following period.

Unpaid interest relating to the past few months. Unpaid wages relating to the last few days in the current fiscal period just ended.

Interest that has been incurred but not yet been paid is recognized as Multiple choice question. unearned interest. deferred interest. accrued interest payable. prepaid interest receivable,

accrued interest payable.

Schmidt Company borrows $10,000 from its bank and signs a 6-month note. Interest, which is due quarterly, is specified in the note as 6%. The interest rate stated in the loan agreement most likely applies to Multiple choice question. a 6-month period. a 3-month period. an entire year.

an entire year.

An interest rate, unless otherwise specified, is typically a(n) Blank______ rate. (Enter one word per blank) Multiple choice question. adjustable annual quarterly monthly

annual

Which of the following is not a category used to assess the likelihood of a loss contingency? Multiple choice question. reasonably possible remote probable certain

certain

Unsecured notes sold in minimum denominations of $25,000 with maturities ranging from 1 to 270 days are referred to as Multiple choice question. commercial paper. trade notes payable. contingencies. bonds payable.

commercial paper.

Unsecured notes sold in minimum denominations of $25,000 with maturities ranging from 1 to 270 days are referred to as Multiple choice question. trade notes payable. bonds payable. contingencies. commercial paper.

commercial paper.

During December, Martin Department Stores sells $240,000 in gift cards. When it sells the gift cards, Martin should recognize Multiple choice question. a gain. a loss. sales revenue. deferred revenue.

deferred revenue.

The costs of satisfying product-related warranties should be recorded as an expense Multiple choice question. during the year of sale. when the related products are repaired or replaced. over the warranty period.

during the year of sale.

All liabilities involve a probable Blank______ sacrifice of economic benefits and arise as a result of Blank______ transactions or events. Multiple choice question. future; future past; future past; past future; past

future; past

Amounts received that will be returned or remitted to others at a future date are recognized as: Multiple choice question. losses liabilities expenses assets

liabilities

Cash collected from customers as refundable deposits or as advance payments for products or services are recognized as Multiple choice question. revenues. prepaid assets. deferred assets. liabilities.

liabilities.

Taxes collected for taxing authorities are recognized as Multiple choice question. prepaid expenses. revenue. liabilities. operating expenses.

liabilities.

Lester Corp. sells merchandise to a customer for $1,000. The company also collects state and local sales taxes of 6% and 4%, respectively. At the time of sale, Lester should recognize the following credits in its ledger (Select all that apply.) Multiple select question. sales revenue of $1,000. sales taxes payable of $100. sales revenue of $1,100.

sales revenue of $1,000. sales taxes payable of $100.