Question 1

A company whose current liabilities exceed its current assets may have a liquidity problem.

Accepted Answer

If a company's current liabilities exceed its current assets, it may face difficulty in meeting its short-term obligations and may have a liquidity problem.

Question 2

Calculation of the amount of the equal periodic payments that would be required at the end of each year to accumulate a $20,000 fund at the end of the tenth year is most readily determined by reference to a table that shows which of the following?
A) Future value of $1.
B) Present value of $1.
C) Future value of annuity of $1.
D) Present value of a single sum.

Accepted Answer

To accumulate a fund through equal periodic payments, you would refer to a "Future value of annuity of $1" table. This table helps determine how much you need to save each year (or other period) to reach a specific amount in the future, considering a certain interest rate over a set period of time.

Question 3

You have been asked to compute the amount that will be available at the end of three years as a result of a single sum of $1,000 that is deposited. What is the interest concept that best describes this application?
A) Present value of a single amount.
B) Present value of an annuity.
C) Future value of a single amount.

Accepted Answer

The interest concept that best describes computing the amount available at the end of a period due to a single sum deposited is the "Future value of a single amount." This concept is used to determine how much an initial deposit will grow over time with a certain interest rate.

Question 4

If a company's ﬁscal year is the same as the year used for property tax purposes, there should be no prepaid property tax on its year-end ﬁnancial statements but there may be a property tax liability.

Accepted Answer

If the company's fiscal year is the same as the year used for property tax purposes, then there should be no prepaid property tax on its year-end financial statements. However, there may still be a property tax liability that needs to be recorded on the financial statements.

Question 5

A future tax asset indicates that the company
A) had some expenses that were deductible for taxes but are prepaid for accounting purposes.
B) expects to pay higher taxes in the future
C) paid their taxes for the current year in advance.
D) expects a benefit in the form of lower taxes in the future.

Accepted Answer

A future tax asset arises when a company expects to reduce its future tax liabilities, often due to overpaid taxes or tax losses that can be carried forward to offset future taxable income.

Question 6

A current liability must be paid out of current earnings.

Accepted Answer

A current liability is defined as a liability that is expected to be settled within one fiscal year or the operating cycle, whichever is longer, and can be paid out of current assets or through the creation of other current liabilities, not necessarily from current earnings.

Question 7

How much would Kristen have to deposit in the bank at the end of each of the next five years if she wishes to have $5,000 in the bank at the end of that time, assuming she will be earning 6% annual rate of return? (Round to the nearest dollar.)
A) $887
B) $943
C) $1,000
D) $1,187

Accepted Answer

Calculation: $5,000 ÷ 5.6371 = $887.

Question 8

Current liabilities are expected to be paid within one year.

Accepted Answer

Current liabilities are typically due within one year or the operating cycle, whichever is longer. Examples of current liabilities include accounts payable, short-term loans, and accrued expenses.

Question 9

Property tax payable is classiﬁed as a long-term liability because it is related to property, a noncurrent asset.

Accepted Answer

Property tax payable is typically classified as a short-term liability because it is usually due within one year, regardless of its association with a noncurrent asset.

Question 10

Kristen's grandmother promises to give her $1,000 at the end of each of the next five years. How much is the money worth today, assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar).
A) $747
B) $1,338
C) $4,212
D) $5,637

Accepted Answer

Calculation: $1,000 × 4.21236 = $4,212.

Question 11

Kristen deposits $5,000 in the bank today. She will be earning 6% interest annually on her deposit. How much money will she have in the bank at the end of 5 years? (Round to the nearest dollar.)
A) $3,736
B) $6,691
C) $21,062
D) $28,186

Accepted Answer

Calculation: $5,000 × 1.33822 = $6,691.

Question 12

All the following transactions lead to temporary timing differences except:
A) the use of estimated warranty costs for calculating warranty expense
B) the use of straight-line amortization for accounting purposes
C) the recognition of dividend income for dividends received from another Canadian company
D) The use of provisions for gift card sales

Accepted Answer

Temporary timing differences arise when there is a difference in the timing of when income or expenses are recognized for accounting purposes versus tax purposes. The recognition of dividend income for dividends received from another Canadian company does not lead to a temporary timing difference because, under certain conditions, such dividends may be received tax-free by the receiving corporation, thus not creating a timing difference between accounting and tax treatments. The other options (A, B, D) involve situations where the recognition or measurement of income/expenses differs between accounting and tax purposes, leading to temporary differences that will reverse in future periods.

Question 13

Future Income taxes are caused by which of the following?
A) A company's inability to pay income tax due in a particular tax year.
B) Accounting errors.
C) The fact that the value of one country's currency relative to that of another can change over time.
D) Differences in IFRS and ITA rules pertaining to when revenue and expenses should be recognized.

Accepted Answer

Future income taxes arise due to differences in the timing of when revenue and expenses are recognized for financial reporting purposes (under accounting standards such as IFRS) and for tax purposes (under tax laws such as the Income Tax Act, or ITA). These differences create temporary timing differences that will reverse in future periods, leading to future tax liabilities or assets.

Question 14

If the market rate of interest is 10%, a rational person would just as soon receive $1,100 three years from now as what amount today (round to the nearest dollar)?
A) $783
B) $826
C) $1,000
D) $1,100

Accepted Answer

Calculation: $1,100 × 0.75131 = $826.

Question 15

Present value can be defined as which of the following?
A) Future amount of a sum of money held now.
B) Value today of future cash inflow(s).
C) Maturity value of a debt.
D) Sum of cash in?ows over a future period of time.

Accepted Answer

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. It represents the value today of future cash inflow(s), taking into account the time value of money.

Question 16

There is a reciprocal relationship between which of the following?
A) Present value of the annuity of $1 and the present value of $1.
B) Future value of $1 and the future value of an annuity of $1.
C) Present value of $1 and the future value of $1.
D) Present value of the annuity of $1 and the future value of annuity of $1.

Accepted Answer

The answer of There is a reciprocal relationship between which...

Question 17

An amount is to be deposited in a savings account at the end of each year in order to provide funds for a trip to Europe, at the end of the fourth year. You have been asked to determine the amount of the annual deposit. What is the interest concept that best describes this application?
A) Present value of a single amount.
B) Present value of an annuity.
C) Future value of a single amount.
D) Future value of an annuity.

Accepted Answer

The correct concept is the future value of an annuity, as it involves making regular (annual) deposits to accumulate a specific amount in the future.

Question 18

If any portion of a long-term debt is to be paid in the next year, the entire debt should be classiﬁed as a current liability.

Accepted Answer

Only the portion of the long-term debt that is due within the next year should be classified as a current liability; the remainder continues to be classified as long-term debt.

Question 19

Kristen's grandmother promises to give her $1,000 at the end of five years. How much is the money worth today, assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar).
A) $747
B) $1,338
C) $4,212
D) $5,637

Accepted Answer

Calculation: $1,000 × 0.74726 = $747.

Question 20

How much would Kristen have to deposit in the bank today if she will be earning a 6% annual rate of return and wants to have $5,000 in the bank at the end of five years? (Round to the nearest dollar).
A) $3,736
B) $4,212
C) $4,737
D) $5,637

Accepted Answer

Calculation: $5,000 × 0.74726 = $3,736.

Quiz 9: Long-Lived Tangible and Intangible Assets

A company whose current liabilities exceed its current assets may have a liquidity problem.

Calculation of the amount of the equal periodic payments that would be required at the end of each year to accumulate a $20,000 fund at the end of the tenth year is most readily determined by reference to a table that shows which of the following?

You have been asked to compute the amount that will be available at the end of three years as a result of a single sum of $1,000 that is deposited. What is the interest concept that best describes this application?

If a company's ﬁscal year is the same as the year used for property tax purposes, there should be no prepaid property tax on its year-end ﬁnancial statements but there may be a property tax liability.

A future tax asset indicates that the company

A current liability must be paid out of current earnings.

How much would Kristen have to deposit in the bank at the end of each of the next five years if she wishes to have $5,000 in the bank at the end of that time, assuming she will be earning 6% annual rate of return? (Round to the nearest dollar.)

Current liabilities are expected to be paid within one year.

Property tax payable is classiﬁed as a long-term liability because it is related to property, a noncurrent asset.

Kristen's grandmother promises to give her $1,000 at the end of each of the next five years. How much is the money worth today, assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar) .

Kristen deposits $5,000 in the bank today. She will be earning 6% interest annually on her deposit. How much money will she have in the bank at the end of 5 years? (Round to the nearest dollar.)

All the following transactions lead to temporary timing differences except:

Future Income taxes are caused by which of the following?

If the market rate of interest is 10%, a rational person would just as soon receive $1,100 three years from now as what amount today (round to the nearest dollar) ?

Present value can be defined as which of the following?

There is a reciprocal relationship between which of the following?

An amount is to be deposited in a savings account at the end of each year in order to provide funds for a trip to Europe, at the end of the fourth year. You have been asked to determine the amount of the annual deposit. What is the interest concept that best describes this application?

If any portion of a long-term debt is to be paid in the next year, the entire debt should be classiﬁed as a current liability.

Kristen's grandmother promises to give her $1,000 at the end of five years. How much is the money worth today, assuming Kristen could invest the money and earn a 6% annual rate of return? (Round to the nearest dollar) .

How much would Kristen have to deposit in the bank today if she will be earning a 6% annual rate of return and wants to have $5,000 in the bank at the end of five years? (Round to the nearest dollar) .