Question 1

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms related to accounting for contingent liabilities under IFRS.Match each phrase with the number for the most correct term.

Accepted Answer

The answer of Listed below are five terms followed by...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

What is the expense that Holyoak should report for its promotional rebates in its 2016 income statement?

Accepted Answer

A)  $142,000.
B)  $152,000.
C)  $170,000.
D)  $200,000.E) B) and C)
F) B) and D)

Question 4

Liabilities payable within the coming year are classified as long-term liabilities if refinancing is completed before date of issuance of the financial statements under:

Accepted Answer

A)  U.S.GAAP.
B)  IFRS.
C)  Either U.S.GAAP and IFRS.
D)  Neither U.S.GAAP and IFRS.E) A) and C)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Unlike the Social Security tax there is no maximum wage base for the Medicare portion of the FICA tax.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False  False

Question 8

Which of the following is not a characteristic of a liability?

Accepted Answer

A)  It represents a probable,future sacrifice of economic benefits.
B)  It must be payable in cash.
C)  It arises from present obligations to other entities.
D)  It results from past transactions or events.E) A) and B)
F) A) and D)

Question 9

Under IFRS,the term "probable" indicates a threshold of probability that is substantially more than a 50 percent chance of occurrence.

Accepted Answer

A) True 
 B)False

Question 10

At the beginning of 2016,Angel Corporation began offering a two-year warranty on its products.The warranty program was expected to cost Angel 4% of net sales.Net sales made under warranty in 2016 were $180 million.Fifteen percent of the units sold were returned in 2016 and repaired or replaced at a cost of $5.3 million.The amount of warranty expense on Angel's 2016 income statement is:

Accepted Answer

A)  $ 5.3 million.
B)  $ 7.2 million.
C)  $10.6 million.
D)  $27.0 million.E) All of the above
F) None of the above

Question 11

Orange Co.can estimate the amount of loss that will occur if a foreign government expropriates some of the company's assets in that country.If expropriation is reasonably possible,a loss contingency should be:

Accepted Answer

A)  Disclosed but not accrued as a liability.
B)  Disclosed and accrued as a liability.
C)  Accrued as liability but not disclosed.
D)  Neither accrued as a liability nor disclosed.E) B) and D)
F) B) and C)

Question 12

Revenue for gift card breakage should be recognized:

Accepted Answer

A)  When the gift card is sold.
B)  No later than the last day of the operating period in which the gift card is delivered to the customer.
C)  When the probability of gift card redemption is viewed as remote.
D)  Under no circumstances,as gift cards are not themselves a delivered product,but rather a selling technique.E) C) and D)
F) B) and C)

Question 13

An extended warranty typically results in the seller:

Accepted Answer

A)  Accruing an expense for anticipated warranty costs at the time the warranty is sold.
B)  Estimating the contingent liability associated with the warranty at the time the warranty is sold.
C)  Recognizing revenue over the life of the extended warranty.
D)  Refunding warranty payments upon expiration of the warranty.E) A) and D)
F) A) and C) C

Question 14

Clark's Chemical Company received customer deposits on returnable containers in the amount of $100,000 during 2016.Twelve percent of the containers were not returned.The deposits are based on the container cost marked up 20%.What is cost of goods sold relative to this forfeiture?

Accepted Answer

A)  $0.
B)  $2,000.
C)  $10,000.
D)  $14,400.E) A) and B)
F) None of the above

Question 15

During the year,L&M Leather Goods sold 1,000,000 reversible belts under a new sales promotional program.Each belt carried one coupon,which entitles the customer to a $4.00 cash rebate.L&M estimates that 70% of the coupons will be redeemed,even though only 500,000 coupons had been processed during the year.At December 31,L&M should report a liability for unredeemed coupons of:

Accepted Answer

A)  $ 700,000.
B)  $ 800,000.
C)  $1,000,000.
D)  $2,800,000.E) None of the above
F) C) and D)

Question 16

All else equal,a large increase in deferred revenue in the current period would be expected to produce what effect on revenue in a future period?

Accepted Answer

A)  Large increase,because deferred revenue becomes revenue when the seller has satisfied its performance obligations.
B)  Large decrease,because deferred revenue implies that less revenue has been earned,which reduces future revenue.
C)  No effect,because deferred revenue is a liability,so payment will use assets rather than providing revenue.
D)  Large decrease,because deferred revenue indicates collection problems that will reduce net revenues in future periods.E) B) and C)
F) C) and D)

Question 17

What was General's coupon promotional expense in 2017?

Accepted Answer

A)  Zero,since all the expense should be reflected in 2016.
B)  $1.5 million.
C)  $7.5 million.
D)  $9.0 million.E) All of the above
F) B) and D)

Question 18

A customer of RoughEdge Sharpeners alleges that RoughEdge's new razor sharpener had a defect that resulted in serious injury to the customer.RoughEdge believes the customer has a 51% chance of winning the case,and that if the customer wins the case,there is a range of losses of between $1,000,000 and $3,000,000 in which any number is equally likely to occur.Under U.S.GAAP,RoughEdge should accrue a liability in the amount of:

Accepted Answer

A)  $0.
B)  $1,000,000.
C)  $2,000,000.
D)  $3,000,000.E) None of the above
F) B) and C)

Question 19

Which of the following is a contingency that should be accrued?

Accepted Answer

A)  The company is being sued and a loss is reasonably possible and reasonably estimable.
B)  The company deducts life insurance premiums from employees' paychecks.
C)  The company offers a two-year warranty and the expenses can be reasonably estimated.
D)  It is probable that the company will receive $100,000 in settlement of a lawsuit.E) A) and B)
F) A) and C)

Question 20

Kline Company refinanced current debt as long-term debt on January 5,2017.Kline's fiscal year ended on December 31,2016,and its financial statements will be issued sometime in early March 2017.Under IFRS,how would Kline classify the debt on its December 31,2016,balance sheet?

Accepted Answer

A)  In the "mezzanine" between current and noncurrent liabilities.
B)  Kline would not classify the debt as current or noncurrent,but rather would write a disclosure note explaining the circumstances.
C)  As a noncurrent liability.
D)  As a current liability.E) All of the above
F) None of the above D

Exam 13: Current Liabilities and Contingencies

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms related to accounting for contingent liabilities under IFRS.Match each phrase with the number for the most correct term.

Correct Answer
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The concept of substance over form influences the classification of obligations expected to be refinanced.

Correct Answer
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What is the expense that Holyoak should report for its promotional rebates in its 2016 income statement?

Correct Answer
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Liabilities payable within the coming year are classified as long-term liabilities if refinancing is completed before date of issuance of the financial statements under:

Correct Answer
verified

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

Correct Answer
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Unlike the Social Security tax there is no maximum wage base for the Medicare portion of the FICA tax.

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

Correct Answer
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False

Which of the following is not a characteristic of a liability?

Correct Answer
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Under IFRS,the term "probable" indicates a threshold of probability that is substantially more than a 50 percent chance of occurrence.

Correct Answer
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Correct Answer
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Orange Co.can estimate the amount of loss that will occur if a foreign government expropriates some of the company's assets in that country.If expropriation is reasonably possible,a loss contingency should be:

Correct Answer
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Revenue for gift card breakage should be recognized:

Correct Answer
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An extended warranty typically results in the seller:

Correct Answer
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C

Clark's Chemical Company received customer deposits on returnable containers in the amount of $100,000 during 2016.Twelve percent of the containers were not returned.The deposits are based on the container cost marked up 20%.What is cost of goods sold relative to this forfeiture?

Correct Answer
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Correct Answer
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All else equal,a large increase in deferred revenue in the current period would be expected to produce what effect on revenue in a future period?

Correct Answer
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What was General's coupon promotional expense in 2017?

Correct Answer
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Correct Answer
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Which of the following is a contingency that should be accrued?

Correct Answer
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Kline Company refinanced current debt as long-term debt on January 5,2017.Kline's fiscal year ended on December 31,2016,and its financial statements will be issued sometime in early March 2017.Under IFRS,how would Kline classify the debt on its December 31,2016,balance sheet?

Correct Answer
verified
D

Exam 13: Current Liabilities and Contingencies

Listed below are five terms followed by a list of phrases that describe or characterize five of the terms related to accounting for contingent liabilities under IFRS.Match each phrase with the number for the most correct term.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the expense that Holyoak should report for its promotional rebates in its 2016 income statement?

Correct AnswerverifiedShow Answer

Liabilities payable within the coming year are classified as long-term liabilities if refinancing is completed before date of issuance of the financial statements under:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Unlike the Social Security tax there is no maximum wage base for the Medicare portion of the FICA tax.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

Which of the following is not a characteristic of a liability?

Correct AnswerverifiedShow Answer

Under IFRS,the term "probable" indicates a threshold of probability that is substantially more than a 50 percent chance of occurrence.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Orange Co.can estimate the amount of loss that will occur if a foreign government expropriates some of the company's assets in that country.If expropriation is reasonably possible,a loss contingency should be:

Correct AnswerverifiedShow Answer

Revenue for gift card breakage should be recognized:

Correct AnswerverifiedShow Answer

An extended warranty typically results in the seller:

Correct AnswerverifiedC

Clark's Chemical Company received customer deposits on returnable containers in the amount of $100,000 during 2016.Twelve percent of the containers were not returned.The deposits are based on the container cost marked up 20%.What is cost of goods sold relative to this forfeiture?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All else equal,a large increase in deferred revenue in the current period would be expected to produce what effect on revenue in a future period?

Correct AnswerverifiedShow Answer

What was General's coupon promotional expense in 2017?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a contingency that should be accrued?

Correct AnswerverifiedShow Answer

Kline Company refinanced current debt as long-term debt on January 5,2017.Kline's fiscal year ended on December 31,2016,and its financial statements will be issued sometime in early March 2017.Under IFRS,how would Kline classify the debt on its December 31,2016,balance sheet?

Correct AnswerverifiedD

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False

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C

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D