Accounting Test Solutions

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Student: ___________________________________________________________________________

1.

Some liabilities are not contractual obligations and may not be payable in cash. True False

2.

Amounts withheld from employees in connection with payroll often represent liabilities to third parties. True False

3.

A customer advance produces a liability that is satisfied when the product or service is provided. True False

4.

Long-term debt that is callable by the creditor in the upcoming year should be classified as a current liability only if the debt is expected to be called. True False

5.

The concept of substance over form influences the classification of obligations expected to be refinanced. True False

6.

Under IFRS, a liability that is refinanced after the balance sheet date but before the financial statements are issued would typically be classified as a current liability. True False

7.

Warranty expense is recorded along with the related liability in the reporting period in which the product under warranty is sold. True False

8.

For a loss contingency to be accrued, the claim must have been made before the accounting period ended. True False

9.

A company should accrue a liability for a loss contingency if it is at least reasonably possible that assets have been impaired and the amount of potential loss can be reasonably estimated. True False

10. A disclosure note is required for all material loss contingencies for which the probability of loss is reasonably possible. True False

11. Under IFRS, the term "probable" indicates a threshold of probability that is substantially higher than a 50/ 50 chance. True False

12. Under IFRS, if it is probable that a contingent liability will result in a future payment but there is a range of equally likely amounts that will be paid, the midpoint of the range should be accrued as a loss. True False

13. The cost of promotional offers should be recorded as expenses in the accounting period when the offers are redeemed by customers. True False

14. Unlike the Social security tax there is no maximum wage base for the Medicare portion of the FICA tax. True False

15. State and Federal Unemployment Taxes (SUTA and FUTA) must be withheld from employees' wages. True False

16. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. __ Liabilities when received.__ __ Confirming event is likely to occur.__ A loss contingency accrued in the period of__ related sales.__ Most common temporary financing__ arrangement.__ __ Requires collateral.__

1. Short-term note 2. Warranty liability 3. Advances from customers 4. Secured loan 5. Probable

17. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 1. Accrued liabilities 2. Discount on notes payable 3. Interest payable 4. Sales tax payable 5. Callable Due on demand. Contra liability. A third party liability. Accrues with passage of time. Expenses incurred but not yet paid. ____ ____ ____ ____ ____

18. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 1. Reasonably possible 2. Noncommitted lines of credit 3. Customer deposits 4. Interest paid on debt 5. Gain contingencies Liabilities until refunded. More than remote but less than likely. Face amount x rate x time. Not recorded until realized. Informal borrowing agreements. ____ ____ ____ ____ ____

19. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. 1. Unasserted claims 2. Factoring 3. Subsequent events 4. Accounting liabilities 5. Effective interest __ Exceeds the stated rate on discounted notes.__ __ May include items that are not legal liabilities.__ __ Sales of receivables.__ Evaluated for recognition only if an unfavorable__ outcome is...
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