Current Liabilities Paper 2

1

Pine Corp. is required to contribute, to an employee stock ownership plan (ESOP), 10% of its income after deduction for this contribution but before income tax. Pine’s income before charges for the contribution and income tax was $75,000. The income tax rate is 30%. What amount should be accrued as a contribution to the ESOP?






2

On July 1, year 2, Ran County issued realty tax assessments for its fiscal year ended June 30, year 3. On September 1, year 2, Day Co. purchased a warehouse in Ran County. The purchase price was reduced by a credit for accrued realty taxes. Day did not record the entire year’s real estate tax obligation, but instead records tax expenses at the end of each month by adjusting prepaid real estate taxes or real estate taxes payable, as appropriate. On November 1, year 2, Day paid the first of two equal installments of $12,000 for realty taxes. What amount of this payment should Day re-cord as a debit to real estate taxes payable?






3

Kemp Co. must determine the December 31, year 2 yearend accruals for advertising and rent expenses. A $500 advertising bill was received January 7, year 3, comprising costs of $375 for advertisements in December year 2 issues, and $125 for advertisements in January year 3 issues of the newspaper. A store lease, effective December 16, year 1, calls for fixed rent of $1,200 per month, payable one month from the effective date and monthly thereafter. In addition, rent equal to 5% of net sales over $300,000 per calendar year is payable on January 31 of the following year. Net sales for year 2 were $550,000. In its December 31, year 2 balance sheet, Kemp should report accrued liabilities of






4

In June year 2, Northan Retailers sold refundable merchandise coupons. Northan received $10 for each coupon redeemable from July 1 to December 31, year 2, for merchandise with a retail price of $11. At June 30, year 2, how should Northan report these coupon transactions?






5

Delect Co. provides repair services for the AZ195 TV set. Customers prepay the fee on the standard one-year service contract. The year 1 and year 2 contracts were identical, and the number of contracts outstanding was substantially the same at the end of each year. However, Delect’s December 31, year 2 deferred revenues’ balance on unperformed service contracts was significantly less than the balance at December 31, year 1. Which of the following situations might account for this reduction in the deferred revenue balance?






6

Brad Corp. has unconditional purchase obligations associated with product financing arrangements. These obligations are reported as liabilities on Brad’s balance sheet, with the related assets also recognized. In the notes to Brad’s financial statements, the aggregate amount of payments for these obligations should be disclosed for each of how many years following the date of the latest balance sheet?






7

Under IFRS, if a long-term debt becomes callable due to the violation of a loan covenant






8

Under IFRS, which of the following accounts would not be considered a “provision”?






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