State the Correct Answer for Current Liabilities Flashcards

Which of the following is a current liability? A) A long-term debt maturing currently, which is to be paid with cash in a sinking fund B) A long-term debt maturing currently, which is to be retired with proceeds from a new debt issue C) A long-term debt maturing currently, which is to be converted into common stock D) None of these

Which of the following is not true about the discount on short-term notes payable? A) The Discount on Notes Payable account has a debit balance B) The Discount on Notes Payable account should be reported as an asset on the balance sheet. C) When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. D) All of these are true

Lopez Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2011. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Lopez recall all cans of this paint sold in the last six months. The management of Lopez estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation? A) No recognition B) Note disclosure only C) Operating expense of $800,000 and liability of $800,000 D) Appropriation of retained earnings of $800,000

Use of the accrual method in accounting for product warranty costs A) is required for federal income tax purposes B) is frequently justified on the basis of expediency when warranty costs are immaterial C) finds the expense account being charged when the seller performs in compliance with the warranty. D) represents accepted practice and should be used whenever the warranty is an integral and inseparable part of the sale.

The effective interest on a 12-month, zero-interest-bearing note payable of $300,000, discounted at the bank at 10% is A) 10.87%. B) 10%. C) 9.09%. D) 11.11%.

Trent, Inc., is a retail store operating in a state with a 5% retail sales tax. The state law provides that the retail sales tax collected during the month must be remitted to the state during the following month. If the amount collected is remitted to the state on or before the twentieth of the following month, the retailer may keep 3% of the sales tax collected. On April 10, 2007, Trent remitted $81,480 tax to the state tax division for March 2007 retail sales. What was Trent 's March 2007 retail sales subject to sales tax? A) $1,629,600 B) $1,596,000 C) $1,680,000 D) $1,645,000

A company gives each of its 50 employees (assume they were all employed continuously through 2010 and 2011) 12 days of vacation a year if they are employed at the end of the year. The vacation accumulates and may be taken starting January 1 of the next year. The employees work 8 hours per day. In 2010, they made $14 per hour and in 2011 they made $16 per hour. During 2011, they took an average of 9 days of vacation each. The company's policy is to record the liability existing at the end of each year at the wage rate for that year. What amount of vacation liability would be reflected on the 2010 and 2011 balance sheets, respectively? A) $67,200; $93,600 B) $76,800; $96,000 C) $67,200; $96,000 D) $76,800; $93,600

Kent Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Kent $2.00 each. Kent estimates that 40 percent of the coupons will be redeemed. Data for 2009 and 2010 are as follows: 2009 2010 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The premium expense for 2009 is A) $25,000 B) $30,000 C) $35,000 D) $50,000

Simson Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2010 may first be taken on January 1, 2011. Information relative to these employees is as follows: Hourly Vacation Days Earned Vacation Days Used Year Wages by Each Employee by Each Employee 2010 $25.80 10 0 2011 27.00 10 8 2012 28.50 10 10
Simson has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. What is the amount of expense relative to compensated absences that should be reported on Simson's income statement for 2010? A) $0. B) $68,880. C) $75,600 D) $72,240

21. Simson Company has 35 employees who work 8-hour days and are paid hourly. On January 1, 2010, the company began a program of granting its employees 10 days of paid vacation each year. Vacation days earned in 2010 may first be taken on January 1, 2011. Information relative to these employees is as follows: Hourly Vacation Days Earned Vacation Days Used Year Wages by Each Employee by Each Employee 2010 $25.80 10 0 2011 27.00 10 8 2012 28.50 10 10
Simson has chosen to accrue the liability for compensated absences at the current rates of pay in effect when the compensated time is earned. What is the amount of expense relative to compensated absences that should be reported on Simson's income statement for 2012? A) $94,920 B) $90,720 C) $79,800 D) $95,760

A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2011. Historically, 10% of customers mail in the rebate form. During 2011, 4,000,000 packages of light bulbs are sold, and 140,000 $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2011 financial statements dated December 31? A) $400,000; $400,000 B) $400,000; $260,000 C) $260,000; $260,000 D) $140,000; $260,000

23. Kent Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Kent $2.00 each. Kent estimates that 40 percent of the coupons will be redeemed. Data for 2010 and 2011 are as follows: 2010 2011 Bags of dog food sold 500,000 600,000 Leashes purchased 18,000 22,000 Coupons redeemed 120,000 150,000 The estimated liability for premiums at December 31, 2010 is A) $7,500 B) $10,000 C) $17,500 D) $20,000

Farr Products Corp. provides an incentive compensation plan under which its president receives a bonus equal to 20% of the corporation's income in excess of $300,000 before income tax but after the bonus. If income before tax and bonus is $1,200,000 and the effective tax rate is 30%, the amount of the bonus would be A) $126,000 B) $150,000 C) $180,000 D) $240,000

During 2006, Blass Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2006 and 2007 are as follows:
Sales Actual Warranty Expenditures 2006 800,000 12,000 2007 1,000,000 30,000 1,800,000 42,000 A) $0. B) $10,000 C) $30,000 D) $66,000