Current Liabilities MCQs

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In accordance with accounting for transfers and servicing, all of the following would be disclosed except






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Lyle, Inc. is preparing its financial statements for the year ended December 31, year 2. Accounts payable amounted to $360,000 before any necessary ...






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Rabb Co. records its purchases at gross amounts but wishes to change to recording purchases net of purchase discounts. Discounts available on purcha...






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On March 1, year 1, Fine Co. borrowed $10,000 and signed a two-year note bearing interest at 12% per annum compounded annually. Interest is payable ...






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On September 1, year 1, Brak Co. borrowed on a $1,350,000 note payable from Federal Bank. The note bears interest at 12% and is payable in three equ...






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Ames, Inc. has $500,000 of notes payable due June 15, year 3. Ames signed an agreement on December 1, year 2, to borrow up to $500,000 to refinance ...






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Cali, Inc. had a $4,000,000 note payable due on March 15, year 3. On January 28, year 3, before the issuance of its year 2 financial statements, Cal...






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On December 31, year 2, Largo, Inc. had a $750,000 note payable outstanding, due July 31, year 3. Largo borrowed the money to finance construction o...






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Lime Co.s payroll for the month ended January 31, year 2, is summarized as follows: Total wages $10,000 Federal income tax withheld 1,200 All wag...






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Under state law, Acme may pay 3% of eligible gross wages or it may reimburse the state directly for actual unemployment claims. Acme believes that a...






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Pine Corp. is required to contribute, to an employee stock ownership plan (ESOP), 10% of its income after deduction for this contribution but before...






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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 w...






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Kemp Co. must determine the December 31, year 2 yearend accruals for advertising and rent expenses. A $500 advertising bill was received January 7, ...






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In June year 2, Northan Retailers sold refundable merchandise coupons. Northan received $10 for each coupon redeemable from July 1 to December 31, y...






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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 ...






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Brad Corp. has unconditional purchase obligations associated with product financing arrangements. These obligations are reported as liabilities on B...






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






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






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Which of the following is NOT a contingent liability?






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A $6,000, 2-month, non-interest-bearing note payable was discounted by a bank at 9%. The amount of the proceeds were






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Which of the following is created by the adjusting entry to recognize interest expense incurred but not yet paid?






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The recording of a product warranty expense in the year the merchandise under warranty is sold is supported by the






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A $40,000, interest-bearing note payable is signed on December 26, 2002. If the note is a 120-day note, what is the maturity date for this short-term ...






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$20,000 cash is borrowed on a 2-month note payable. If the interest cost to borrow is $400, what is the actual interest rate on this note?






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$20,000 cash is borrowed on a 2-month note payable. If the interest cost to borrow is $400, and the cash proceeds received and available to use for th...






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Which of the following is a contra-liability account?






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The most common type of liability is:






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Which of the following is not a characteristic of a liability?






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Which of the following is the best definition of a current liability?






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Which of the following is not a liability?






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Current liabilities normally are recorded at their:






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Current liabilities are normally recorded at the amount expected to be paid rather than at their present value. This practice can be supported by GAAP...






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The key accounting considerations relating to accounts payable are:






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Classifying liabilities as either current or long-term helps creditors assess:






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When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in:






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A discount on a noninterest-bearing note payable is classified in the balance sheet as:






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The rate of interest printed on the face of a note payable is called the:






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The rate of interest that actually is incurred on a note payable is called the:






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On October 31, 2011, Simeon Builders borrowed $16 million cash and issued a 7-month, noninterest-bearing note. The loan was made by Star Finance Co. w...






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Jane’s Donut Co. borrowed $200,000 on January 1, 2011, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity o...






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What is the effective interest rate (rounded) on a 3-month, noninterest-bearing note with a stated rate of 12% and a maturity value of $200,000?






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On September 1, 2011, Hiker Shoes issued a $100,000, 8-month, noninterest-bearing note. The loan was made by Second Commercial Bank whose stated disco...






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Universal Travel Inc. borrowed $500,000 on November 1, 2011, and signed a 12-month note bearing interest at 6%. Interest is payable in full at maturit...






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Knique Shoes issued a $100,000, 8-month, "noninterest-bearing note." The loan was made by Second Commercial Bank whose stated "discount rate" is 9%. T...






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Oklahoma Oil Corp. paid interest of $785,000 during 2011, and the interest payable account decreased by $125,000. What was interest expense for the ye...






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On June 1, 2011, Dirty Harry Co. borrowed cash by issuing a 6-month noninterest-bearing note with a maturity value of $500,000 and a discount rate of ...






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At times, businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided....






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M Corp. has an employee benefit plan for compensated absences that gives employees 15 paid vacation days. Vacation days can be carried over indefinite...






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Which of the following generally is associated with accounts payable? Interest Expense; Reported at Present Value






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Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 20...






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All of the following but one represent collections for third parties. Which one of the following is not a collection for a third party?






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When a deposit on returnable containers is forfeited, the firm holding the deposit will experience:






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B Corp. has an employee benefit plan for compensated absences that gives employees 10 paid vacation days and 10 paid sick days. Both vacation and sick...






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On January 1, 2011, G Corporation agreed to grant its employees two weeks vacation each year, with the stipulation that vacations earned each year can...






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Revenue associated with gift card sales should be recognized:






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All else equal, a large increase in unearned revenue in the current period would be expected to produce what effect on revenue in a future period?






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Peterson Photoshop sold $1000 of gift cards on a special promotion on October 15, 2011, and sold $1500 of gift cards on another special promotion on N...






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When a product or service is delivered for which a customer advance has been previously received, the appropriate journal entry includes:






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Clark’s Chemical Company received customer deposits on returnable containers in the amount of $100,000 during 2011. Twelve percent of the containers...






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In May of 2011, Raymond Financial Services became involved in a penalty dispute with the EPA. At December 31, 2011, the environmental attorney for Ray...






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Slotnick Chemical received customer deposits on returnable containers in the amount of $300,000 during 2011. Fifteen percent of the containers were no...






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Which of the following is not a current liability?






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Short-term obligations can be reported as long-term liabilities if:






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Of the following, which typically would not be classified as a current liability?






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Large, highly rated firms sometimes sell commercial paper:






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Which of the following situations would not require that long-term liabilities be reported as current liabilities on a classified balance sheet?






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A long-term liability should be reported as a current liability in a classified balance sheet if the long-term debt






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On December 31, 2011, L, Inc. had a $1,500,000 note payable outstanding, due July 31, 2012. L borrowed the money to finance construction of a new plan...






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Liabilities payable within the coming year are classified as long-term liabilities if refinancing is completed before date of issuance of the financia...






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Kline Company refinanced current debt as long-term debt on January 5, 2012. Kline’s fiscal year ended on December 31, 2011, and its financial statem...






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Branch Company, a building materials supplier, has $18,000,000 of notes payable due April 12, 2012. At December 31, 2011, Branch signed an agreement w...






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Other things being equal, most managers would prefer to report liabilities as noncurrent rather than current. The logic behind this preference is that...






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Footnote disclosure is required for material potential losses when the loss is at least reasonably possible:






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Gain contingencies usually are recognized in a company’s income statement when:






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A company should accrue a loss contingency only if the likelihood that a liability has been incurred is:






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A contingent loss should be reported in a footnote to the financial statements rather than being accrued if:






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Which of the following is a contingency that should be accrued?






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A loss contingency should be accrued in a company’s financial statements only if the likelihood that a liability has been incurred is:






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Paul Company issues a product recall due to an apparently pre-existing and material defect discovered after the end of its fiscal year. Financial stat...






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Accounting for costs of incentive programs for customer purchases:






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Providing a monetary rebate program for purchasing a product:






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The main difference between accounting for rebate and cash discount coupons is:






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Which of the following entail essentially the same accounting treatment?






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Blue Co. can estimate the amount of loss that will occur if a foreign government expropriates some of the company’s assets in that country. If the l...






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Orange Co. can estimate the amount of loss that will occur if a foreign government expropriates some of the company’s asset in that country. If expr...






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Red Co. can estimate the amount of loss that will occur if a foreign government expropriates some of the company’s assets in that country. If exprop...






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Z Co. filed suit against W, Inc. in 2011 seeking damages for patent infringement. At December 31, 2011, legal counsel for Z believed that it was proba...






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When a material gain contingency is probable and the amount of gain can be reasonably estimated, the gain should be:






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Which of the following is a contingency that would most likely require accrual?






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The cost of customer premium offers should be charged to expense:






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The accounting concept that requires recognition of a liability for customer premium offers is






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Accounting for costs of incentive programs for frequent customer purchases involves:






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A customer of RoughEdge Sharpeners alleges that RoughEdge’s new razor sharpener had a defect that resulted in serious injury to the customer. RoughE...






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A customer of Razor Sharpeners alleges that Razor’s new razor sharpener had a defect that resulted in serious injury to the customer. Razor believes...






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Volt Electronics sells equipment that includes a three-year warranty. Repairs under the warranty are performed by an independent service company under...






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Funzy Cereal includes one coupon in each package of Wheatos that it sells and offers a toy car in exchange for $1.00 and 3 coupons. The cars cost Funz...






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Captain Cook Cereal includes one coupon in each package of Granola that it sells and offers a puzzle in exchange for $2.00 and 3 coupons. The puzzles ...






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At the beginning of 2011, Angel Corporation began offering a 2-year warranty on its products. The warranty program was expected to cost Angel 4% of ne...






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During 2011, Deluxe Leather Goods sold 800,000 reversible belts under a new sales promotional program. Each belt carried one coupon, which entitles th...






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In 2011, Holyoak Inc. offers a $20 cash rebate coupon to customers who purchased one of its new line of products. Holyoak sold 10,000 of these product...