Question 1

Discuss how to account for contingent liabilities.

Accepted Answer

The answer of Discuss how to account for contingent liabilities....

Question 2

Discuss the types of estimated liabilities.

Accepted Answer

The answer of Discuss the types of estimated liabilities....

Question 3

On June 14,Cool Sports gave a 90-day note payable to Quick Skis,instead of cash payment of an overdue account.The amount of the note was $85,000 at an interest rate of 12%.
Prepare the journal entry on Cool Sports books to record the note payable.

Accepted Answer

The answer of On June 14,Cool Sports gave a 90-day...

Question 4

Pending lawsuits:
A) Are always considered estimated liabilities.
B) Should always be recorded.
C) Should always be disclosed.
D) Should be disclosed if payment for damages is probable but the amount cannot be reliably estimated.
E) None of these answers is correct.

Accepted Answer

Pending lawsuits should be disclosed in the footnotes if payment for damages is probable but the amount cannot be reliably estimated. If the outcome is uncertain, and there is no reasonable estimate of the potential loss, then no accrual should be recorded, but disclosure should still be made in the notes to the financial statements. It is not always necessary to record a liability for pending lawsuits, especially if the outcome is uncertain.

Question 5

On November 16,2015,Williams Industrial gave Phillip Co.a 90-day,8%,$80,000 note payable to extend a past due account payable. Prepare the journal entry for Williams Industrial to record payment of the note on Feb 14,2016.Williams Industrial recorded a December 31^st year end adjusting entry.

Accepted Answer

The answer of On November 16,2015,Williams Industrial gave Phillip Co.a...

Question 6

Provisions must be recorded if:
A) The future event is probable and the amount can be reliably estimated.
B) The future event is unlikely.
C) The future event is probable,but the amount cannot be estimated.
D) The future event is unlikely,but the amount can be reliably estimated.
E) All of these answers are correct.

Accepted Answer

Provisions should be recorded if they meet two criteria, which are (1) the future event is probable and (2) the amount can be reliably estimated. Option A is the only choice that correctly states this criteria. Option C is incorrect because if the amount cannot be estimated, then a provision cannot be recognized. Option B and D are incorrect because if the future event is unlikely, then a provision is not necessary. Option E is incorrect because not all of the answers are correct - only option A is correct.

Question 7

Uncertainties such as doubtful accounts:
A) Are not provisions because they are future events not arising out of past transactions.
B) Are provisions because they are future events arising from past transactions.
C) Should not be disclosed.
D) Are provisions because the amounts are uncertain.
E) Are not provisions since they relate to normal business activities.

Accepted Answer

The answer of Uncertainties such as doubtful accounts:
A) Are not...

Question 8

On November 16,2015,Source for Sports gave Kinsmen Sports a 90-day,12%,$60,000 note payable to extend a past due account payable.
Prepare the journal entry for Source for Sports to record the note and the extension of the past due account.

Accepted Answer

The answer of On November 16,2015,Source for Sports gave Kinsmen...

Question 9

Breathe Therapeutic Company is located in Medicine Hat,Alberta and is a retailer of massage supplies.Beginning inventory is $70,000,and Breathe uses the perpetual inventory system.Complete the journal entries on the following dates,including 5% GST as applicable.

Accepted Answer

The answer of Breathe Therapeutic Company is located in Medicine...

Question 10

West Coast Outdoor Co.sold $22,000 worth of trampolines with a one year warranty.The company estimates that 2% of the sales will result in warranty work.West Coast Outdoor Co.should:
A) Recognize warranty expense at the time of sale.
B) Recognize warranty expense at the time warranty work is performed.
C) Recognize warranty liability at the time of sale.
D) Recognize warranty expense and warranty liability at the time of sale.
E) Recognize warranty expense at the time warranty work is performed and warranty liability at the time of salE.

Accepted Answer

According to the matching principle, expenses should be recognized in the same period as the related revenue. Therefore, warranty expense should be recognized at the time of sale, as the warranty is sold with the product. Additionally, a warranty liability should be recognized at the time of sale to reflect the estimated cost of providing warranty service. Therefore, the best choice is to recognize both warranty expense and warranty liability at the time of sale, which is option D.

Question 11

West Coast Outdoor Co.estimates that warranty expense will be 1% of sales.The current period's sales were $740,000.The entry to record the warranty expense is:
A)

B)

C)

D)

E)

Accepted Answer

The answer of West Coast Outdoor Co.estimates that warranty expense...

Question 12

On June 14 ,Multi Sports received a 90-day note payable from Single Sport,instead of cash payment of an overdue account.The amount of the note was $45,000 at an interest rate of 10%.
What is the total amount of interest for the note?

Accepted Answer

The answer of On June 14 ,Multi Sports received a...

Question 13

Estimated liabilities can arise from:
A) Warranties.
B) Property taxes.
C) Income taxes.
D) Employee benefits.
E) All of these answers are correct.

Accepted Answer

Estimated liabilities can arise from a variety of sources such as warranties, property taxes, income taxes, and employee benefits. Therefore, all of the given answer choices are correct.

Question 14

Employee vacation benefits:
A) Are estimated liabilities.
B) Are contingent liabilities.
C) Become an expense when the employee takes a vacation.
D) Are not recorded until the employee leaves.
E) Are not required by law.

Accepted Answer

Employee vacation benefits are considered estimated liabilities because they represent obligations that a company expects to settle in the future, based on the services employees have already provided.

Question 15

Explain the difference between current and long-term liabilities.

Accepted Answer

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Question 16

Explain known current liabilities.

Accepted Answer

The answer of Explain known current liabilities....

Question 17

Contingent liabilities occur when the liability is:
A) Probable and can be reliably estimated.
B) Cannot be reliably estimated.
C) Known and determinable.
D) Reliably estimated.
E) All of these answers are correct.

Accepted Answer

The answer of Contingent liabilities occur when the liability is:
A)...

Question 18

Explain the concept of interest.

Accepted Answer

The answer of Explain the concept of interest....

Question 19

On November 16,2015,Kinsmen Sports gave Source for Sports a 120-day,8%,$120,000 note payable to extend a past due account payable.
What amount of interest expense should Source for Sports report for calendar 2015?

Accepted Answer

The answer of On November 16,2015,Kinsmen Sports gave Source for...

Question 20

A contingent liability:
A) Is a liability of a specific amount.
B) Is a potential obligation that depends on a future event arising out of a past transaction.
C) Is an obligation not requiring immediate payment.
D) Is an obligation arising from the purchase of goods or services on credit.
E) None of these answers is correct.

Accepted Answer

A contingent liability is a potential obligation that depends on a future event arising out of a past transaction. It is not a liability of a specific amount, and it may or may not require immediate payment. It is also not necessarily related to the purchase of goods or services on credit.

Quiz 11: Current Liabilities

Discuss how to account for contingent liabilities.

Discuss the types of estimated liabilities.

On June 14,Cool Sports gave a 90-day note payable to Quick Skis,instead of cash payment of an overdue account.The amount of the note was $85,000 at an interest rate of 12%. Prepare the journal entry on Cool Sports books to record the note payable.

Pending lawsuits:

On November 16,2015,Williams Industrial gave Phillip Co.a 90-day,8%,$80,000 note payable to extend a past due account payable. Prepare the journal entry for Williams Industrial to record payment of the note on Feb 14,2016.Williams Industrial recorded a December 31st year end adjusting entry.

Provisions must be recorded if:

Uncertainties such as doubtful accounts:

On November 16,2015,Source for Sports gave Kinsmen Sports a 90-day,12%,$60,000 note payable to extend a past due account payable. Prepare the journal entry for Source for Sports to record the note and the extension of the past due account.

Breathe Therapeutic Company is located in Medicine Hat,Alberta and is a retailer of massage supplies.Beginning inventory is $70,000,and Breathe uses the perpetual inventory system.Complete the journal entries on the following dates,including 5% GST as applicable.

West Coast Outdoor Co.sold $22,000 worth of trampolines with a one year warranty.The company estimates that 2% of the sales will result in warranty work.West Coast Outdoor Co.should:

West Coast Outdoor Co.estimates that warranty expense will be 1% of sales.The current period's sales were $740,000.The entry to record the warranty expense is:

On June 14 ,Multi Sports received a 90-day note payable from Single Sport,instead of cash payment of an overdue account.The amount of the note was $45,000 at an interest rate of 10%. What is the total amount of interest for the note?

Estimated liabilities can arise from:

Employee vacation benefits:

Explain the difference between current and long-term liabilities.

Explain known current liabilities.

Contingent liabilities occur when the liability is:

Explain the concept of interest.

On November 16,2015,Kinsmen Sports gave Source for Sports a 120-day,8%,$120,000 note payable to extend a past due account payable. What amount of interest expense should Source for Sports report for calendar 2015?

A contingent liability:

On November 16,2015,Williams Industrial gave Phillip Co.a 90-day,8%,$80,000 note payable to extend a past due account payable. Prepare the journal entry for Williams Industrial to record payment of the note on Feb 14,2016.Williams Industrial recorded a December 31^st year end adjusting entry.