ACCT 305 ACCT305 Chapter 13 Quiz Answers

ACCT 305 ACCT305 Chapter 13 Quiz Answers

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DeVry ACCT 305 ACCT/305 ACCT305 Chapter 13 Quiz

  1. The essential characteristics of a liability do not include:
  2. Of the following, which usually would not be classified as a current liability
  3. Which of the following results in an accrued liability?
  4. On November 1, Epic Distributors borrowed $24 million cash to fund an expansion of its facilities. The loan was made by WW BancCorp under a short-term line of credit. Epic issued a 9-month, 12% promissory note. Interest was payable at maturity. Epic's fiscal period is the calendar year. In Epic's adjusting entry for the note on December 31, interest expense will be:
  5. On October 1, 2011, Parton Industries borrowed $12 million cash to provide working capital. The loan was made by Second Bank under a short-term line of credit. Parton issued an 8-month, "noninterest-bearing note." 8% is the bank's stated "discount rate." Parton's fiscal period is the calendar year. In Parton's 2011 income statement interest expense for the note will be:
  6. Commercial paper has become an increasingly popular way for companies to raise funds. Which of the following is not true regarding commercial paper?
  7. On November 1, Shearer Shoes borrowed $18 million cash and issued a 6-month, "noninterest-bearing note." The loan was made by Third Commercial Bank whose stated "discount rate" is 9%. Shearer's effective interest rate on this loan is:
  8. Under U.S. GAAP, liabilities payable within one year can be excluded from current liabilities only if:
  9. Under IFRS, a company can demonstrate their ability to refinance long-term debt for purposes of excluding the debt from current liabilities by:
  10. Reunion BBQ has $4,000,000 of notes payable due on March 11, 2012, which Reunion intends to refinance. On January 5, 2012, Reunion signed a line of credit agreement to borrow up to $3,500,000 cash on a two-year renewable basis. On the December 31, 2011, balance sheet, Reunion should classify:
  11. Which of the following statements concerning lines of credit is untrue?
  12. On January 1, 2011, Yukon Company agreed to grant its employees two weeks vacation each year, with the provision that vacations earned in a particular year could be taken the following year. For the year ended December 31, 2011, all twelve of Yukon's employees earned $1,200 per week each. Eight of these vacation weeks were not taken during 2011. In Yukon's 2011 income statement, how much expense should be reported for compensated absences?
  13. An enterprise should accrue a liability for compensation of employees' unpaid vacations if certain conditions exist. Each of the following is a condition for accrual except:
  14. In its 2011 financial statements, an enterprise should accrue a liability for a loss contingency involving a possible cash payment if certain conditions exist. Each of the following is a condition for accrual except:
  15. Which of the following loss contingencies generally do not require accrual?
  16. Warren Advertising becomes aware of a lawsuit after the end of the fiscal year, but prior to the issuance of financial statements. A loss should be accrued and a liability should be reported if the amount can be reasonably estimated and:
  17. A loss contingency should be accrued when the amount of loss is known and the occurrence of the loss is:
  18. During 2011 Green Thumb Company introduced a new line of garden shears that carry a two-year warranty against defects. Experience indicates that warranty costs should be 2% of net sales in the year of sale and 3% in the year after sale. Net sales and actual warranty expenditures were as follows:
     
    At December 31, 2012, Green Thumb should report as a warranty liability of:
  19. There is a possibility of a safety hazard for a manufactured product. As yet, no claim has been made for damages, though there is a reasonable possibility that a claim will be made. If a claim is made, it is probable that damages will be paid and the amount of the loss can be reasonably estimated. This possible loss must be:
  20. Gain contingencies usually are recognized in the income statement when:
  21. Under IFRS, if every amount in a range of contingent losses is equally likely, the amount accrued is the:

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