Question 1

If the present and future values are known along with the number of periods,then the _________________________ can be determined.

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Question 2

You just won the lottery.You can take your $2 million in a lump sum today,or you can receive $220,000 per year over the next 12 years.Assuming a 6% interest rate,which would you prefer,ignoring tax considerations?

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Question 3

Mobile Designs,Inc.
Use the selected data from the comparative financial statements for Mobile Designs,Inc.to answer the questions that follow.
Mobile Designs,Inc.
Balance Sheet Accounts
(all accounts have normal balances)
(in millions)
  Refer to the account information for Mobile Designs,Inc.
REQUIRED:
Compute the total current liabilities for the years 2013 and 2012.Calculate the percentage change in the total current liabilities.

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The answer of Mobile Designs,Inc.
Use the selected data from the...

Question 4

You just purchased an automobile for $19,450 and must decide how to pay for it.Your local bank has granted you a five-year loan.Annual payments on the loan will be made at the end of each year and the amount of the loan payments,which include principal and interest,is $5,000 per year.What is the interest rate that is being charged on the loan?

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Question 5

There are very important differences between U.S.and international standards regarding contingencies.Even the terms used to refer to situations with unknown outcomes differ.Explain these differences.

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Question 6

Below are several independent items listed for which the outcome of events is unknown at year-end,December 31,2012.
a.Margo Company had a barge that leaked oil into the waters surrounding Alaska.The company's legal counsel believes that the outcome may be unfavorable but has not been able to estimate the costs of the possible loss.
b.It is alleged by Margo Company that ABC Company has infringed on its trademark,during a recent advertising campaign.Margo is suing ABC and its legal experts believe that the suit will result in an award of $750,000 in Margo's favor.
c.Margo offers 2-year warranties on the equipment it sells and believes that 5% of its equipment will require warranty repairs.
d.A $35 coupon,good for one year is offered by Margo during December.At December 31,approximately 10% of the coupons have been redeemed and it is estimated that there will be a total redemption rate of 45%.
e.Margo Company has been sued by the federal government for EPA violations.The company's legal counsel believes that there will be an unfavorable verdict and has made an estimate of the probable loss.
REQUIRED:
1.Identify which of the items (a)through (e)should be recorded at year-end.
2.Identify which of the items (a)through (e)should not be recorded but should be disclosed in the year-end financial statements.

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Question 7

You friend,Edwin Slotkin,has started a new business,but has recently encountered a slight cash flow problem.He obtains a $1,000 loan at 10% per year from a local bank,but would like to ask you about the terms.The bank has deducted the interest in advance and he wants to know if 10% is his effective interest rate.How would you respond in an email?

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Question 8

According to the text,almost all current liabilities appear in the Operating Activities category of the statement of cash flows,but there are exceptions.Explain the exceptions and give an example.

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Question 9

What are examples of accounts that might be classified as accrued liabilities in the current liabilities section of the balance sheet?

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Question 10

Mobile Designs,Inc.
Use the selected data from the comparative financial statements for Mobile Designs,Inc.to answer the questions that follow.
Mobile Designs,Inc.
Balance Sheet Accounts
(all accounts have normal balances)
(in millions)
  Refer to the account information for Mobile Designs,Inc.
REQUIRED:
Calculate the current and quick ratios for 2013 and 2012.Comment on the direction and significance of the change in the ratios.

Accepted Answer

The answer of Mobile Designs,Inc.
Use the selected data from the...

Question 11

What is the purpose of the current ratio? How does the quick ratio differ from the current ratio?

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Question 12

If the market value that you paid for a car is known and the annual payment and number of payments is known,the table factor to help find the interest rate can be calculated by dividing ______________________.

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Question 13

Working Capital = Current Assets - Current Liabilities
= $400,500* - $174,730
= $225,770

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Question 14

Assume that you want to accumulate $20,000 as a down payment on a home.You believe that you can save $2,000 per semiannual period,and your bank will pay interest of 6% per year,or 3% per semiannual period.How long will it take you to accumulate the desired amount?

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Question 15

Dallas Company uses the indirect method of preparing the statement of cash flows and has the following current liabilities at the beginning of the period: Accounts Payable,$35,000;Taxes Payable,$15,000.At the end of the period,the balances of the account are as follows: Accounts Payable,$25,000;Taxes Payable,$20,000.What amounts will appear in the cash flow statement? In what category of the statement will they appear?

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Question 16

You have received an email from a new accounting client,Jamal Parker,who has just started a new business.Jamal would like you to explain whether it is really that beneficial for him to take advantage of a 2/10,net 30 discount offered by one of his suppliers,given his limited cash flow.In a memo,explain to him why this is or is not a sound financial move for his new company.Most firms attempt to pay their accounts payable within the discount period to take advantage of the discount.Why is that normally a sound financial move?

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Question 17

Mobile Designs,Inc.
Use the selected data from the comparative financial statements for Mobile Designs,Inc.to answer the questions that follow.
Mobile Designs,Inc.
Balance Sheet Accounts
(all accounts have normal balances)
(in millions)
  Refer to the account information for Mobile Designs,Inc.
REQUIRED:
(1)Calculate percentage changes in accounts payable and income taxes payable.Give a possible explanation for the changes in these accounts.
(2)By how much did Mobile Designs' long-term and short-term borrowings change from 2012 to 2013? Give a possible explanation for the change in debt.What other financial statement would be useful in analyzing the change in borrowings? Why?

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Use the selected data from the...

Question 18

Each of the following situations involves the use of discounts:
1.How much discount may Mallory Inc.take in each of the following transactions?
What was the annualized interest rate?
a.Mallory purchases inventory costing $970,terms 3/10,n/40.
b.Mallory purchases new office furniture costing $2,100,terms 2/10,n/30.
2.Calculate the discount rate that Mallory received in each of these transactions.
a.Mallory purchased office supplies costing $450 and paid within the discount period with a check for $425.
b.Mallory purchased merchandise for $1,900.It paid within the discount period with a check for $1,870.

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Question 19

A firm's year ends on December 31.Its tax is computed and submitted to the U.S.Treasury on March 15 of the following year.When should the taxes be reported as a liability?

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Question 20

What is meant by the term "current maturities of long-term debt" in the current liabilities section of the balance sheet?

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Quiz 9: Current Liabilities, contingencies, and the Time Value of Money

If the present and future values are known along with the number of periods,then the _________________________ can be determined.

You just won the lottery.You can take your $2 million in a lump sum today,or you can receive $220,000 per year over the next 12 years.Assuming a 6% interest rate,which would you prefer,ignoring tax considerations?

There are very important differences between U.S.and international standards regarding contingencies.Even the terms used to refer to situations with unknown outcomes differ.Explain these differences.

According to the text,almost all current liabilities appear in the Operating Activities category of the statement of cash flows,but there are exceptions.Explain the exceptions and give an example.

What are examples of accounts that might be classified as accrued liabilities in the current liabilities section of the balance sheet?

What is the purpose of the current ratio? How does the quick ratio differ from the current ratio?

If the market value that you paid for a car is known and the annual payment and number of payments is known,the table factor to help find the interest rate can be calculated by dividing ______________________.

Working Capital = Current Assets - Current Liabilities = $400,500* - $174,730 = $225,770

Assume that you want to accumulate $20,000 as a down payment on a home.You believe that you can save $2,000 per semiannual period,and your bank will pay interest of 6% per year,or 3% per semiannual period.How long will it take you to accumulate the desired amount?

A firm's year ends on December 31.Its tax is computed and submitted to the U.S.Treasury on March 15 of the following year.When should the taxes be reported as a liability?

What is meant by the term "current maturities of long-term debt" in the current liabilities section of the balance sheet?