Question 1

On September 1, 2014, XYZ borrowed $100,000 on a 9%, two-year, note payable.Simple interest is payable on August 31, 2015 and 2016.XYZ's reporting year ends December 31 and the company does not use reversing entries for interest.The required entry on August 31, 2001, is:

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The answer of On September 1, 2014, XYZ borrowed $100,000...

Question 2

On September 1, 2020, a company purchased a machine and paid for it by signing a two-year noninterest-bearing note, face $4,000.The note is payable August 31, 2022.The going rate of interes was 18% per year.The accounting period ends December 31.
(a)Compute the cost of the machine.
(b)Give all appropriate entries throughout the term of the note.
Use the net method.

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The answer of On September 1, 2020, a company purchased...

Question 3

Under IFRS, a continuity schedule must be provided for both provisions and contingencies.

Accepted Answer

Under IFRS, a continuity schedule is required for provisions (IAS 37) but not for contingencies. Contingencies are disclosed only if a future outflow of resources embodying economic benefits is not remote.

Question 4

Quality 9000 International Inc., which began operations in 1996, sells 20,000 units of its product each year under the following warranty: defective units will be fixed free of charge during the calendar year of purchase and the next two calendar years.(This means it is best to buy from this company early in the year.)Only 1% of units sold have required warranty service in the past.The average cost has been $200 per unit for servicing.Units require service only once and the likelihood of a unit requiring service is the same during each year in the warranty period.What is the balance in the warranty liability account at December 31, 1999?

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The answer of Quality 9000 International Inc., which began operations...

Question 5

A retail store has completed certain transactions that management believes may have caused current liabilities.Indicate by check mark whether the following items should be classified as current liabilities.Assume a December 31 year-end.

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The answer of A retail store has completed certain transactions...

Question 6

Under the warranty revenue approach, there should be no income statement effects for warranty repairs performed after the year of sale (assuming that accrued warranty expenses and expenditures equal one another).

Accepted Answer

Under the warranty revenue approach, warranty costs are estimated and recognized as an expense in the income statement in the year of sale, creating a warranty liability. When actual warranty repairs occur in subsequent years, they reduce the liability without affecting the income statement, assuming the initial estimate was accurate. However, if actual costs differ from the estimate, adjustments would affect the income statement.

Question 7

Loyalty points are provided (accrued)for and reversed once the points are redeemed.

Accepted Answer

Loyalty points are accrued as rewards for customer purchases or actions, but they are not reversed once redeemed; instead, they are subtracted from the customer's points balance.

Question 8

A company has been sued for damages as a result of illness caused to local residents due to the emission of highly toxic chemicals from its plant.The company's legal firm advises that it is probable that the company will lose the suit and that it probably will result in a judgment of $2 million to $10 million in damages.However, the legal firm believes that the most probable amount o the loss will be $6 million, and that the suit will be terminated about three years hence.The company has no other lawsuits pending.
(a)Should the company disclose this event in the year the suit was filed? (check one)No;
________ Note only; A loss in the income statement.
(b)If a loss should be reported, give the journal entry required:

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The answer of A company has been sued for damages...

Question 9

Financial liabilities are initially recognized at fair value and at cost, amortized cost or fair value post-acquisition.

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The answer of Financial liabilities are initially recognized at fair...

Question 10

BRIEFLY explain how the treatment of contingencies differs under IFRS and ASPE.

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The answer of BRIEFLY explain how the treatment of contingencies...

Question 11

Conceptually, liabilities constitute a present obligation as a result of a past event and entail an expected future sacrifice of assets or services.

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The answer of Conceptually, liabilities constitute a present obligation as...

Question 12

Capitalization of borrowing costs on qualifying assets is mandatory under both IFRS and ASPE.

Accepted Answer

Under IFRS, capitalization of borrowing costs on qualifying assets is mandatory, but under ASPE, it is optional.

Question 13

On September 1, 2020, a company signed a $6,540, one-year, non-interest-bearing note payable and received $6,000 cash.
(a)What was the imputed rate of interest? %.
(b)Give the entry required at September 1, 2020, to record the receipt of the cash (record on net basis).
(c)Give the adjusting entry required at the end of the accounting year, December 31, 2020.
(d)Give the entry required on the due date, August 31, 2021, assuming no reversing entries were made.

Accepted Answer

The answer of On September 1, 2020, a company signed...

Question 14

On January 1, 2012, a company purchased a machine that had a list price of $23,500.The purchase terms agreed upon were: cash down payment $12,000 plus a 15% note payable of $9,132 (its present value).The note is payable in three equal annual instalments (interest plus principal)on each December 31.Round to the nearest dollar.
Required:
(a)Give the entry to record the acquisition of the machine.
(b)Give the adjusting entry required on September 30, 2014, for interest assuming this is the end of the accounting period.

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The answer of On January 1, 2012, a company purchased...

Question 15

Discounting is not required when the time value of money is immaterial or if the amount and timing of cash flows is highly uncertain.

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The answer of Discounting is not required when the time...

Question 16

Adjustments to fair value relating to FVTPL liabilities will always flow through earnings.

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The answer of Adjustments to fair value relating to FVTPL...

Question 17

On January 1, 2000, a corporation purchased a machine (10 year estimated useful life; no residual value; straight-line method)by paying cash $1,500 and signing a note payable with a face amount of
$4,500, 8% interest payable each December 31.The maturity date is December 31, 2002.The going market rate of interest was 10%.Give all required entry (entries)at each of the following dates:
January 1, 2000:
December 31, 2000:

Accepted Answer

The answer of On January 1, 2000, a corporation purchased...

Question 18

At December 31, 2015, ABC Company has the following three separate lawsuits pending against it: Suit A-Plaintiffs seek damages of $40,000; Suit B-Plaintiff seeks damages of $200,000; and Suit
C-Plaintiff seeks damages of $20,000.
ABC management and legal counsel have made the assessments indicated below.For each suit, taking into account the assessment, you are to (a)give the accrual entry if it is required (if not, state why)and (b)indicate whether a disclosure note is required and explain the reason.
CASE A-Remote that ABC will lose the suit.
(a)Accrual entry:
(b)Disclosure note Yes
________No.

Accepted Answer

The answer of At December 31, 2015, ABC Company has...

Quiz 12: Financial Liabilities and Provisions