Question

16. A company had sales of $1 million. Coupons in the amount of $1 per $10 in sales were given to paying customers. History has shown that 50% of all coupons are redeemed. Which of the following statements is correct?
A. A provision for $50,000 must be recognized.
B. A provision for $100,000 must be recognized.
C. A provision for $1 million must be recognized.
D. No provision is necessary.

17. By law, a fleet of aircraft must be subject to a major overhaul every 5 years as part of its scheduled maintenance program. Which of the following statements is correct?
A. An accrual should be made in each of the 5 years preceding the overhaul.
B. The costs of the overhaul should be expensed as incurred.
C. The cost of the overhaul should be deferred and amortized.
D. The estimated cost of the overhaul should be disclosed as part of a continuity schedule in the notes to the financial statements.

18. Contingent liabilities will or will not become actual liabilities depending on:
A. Whether they are probable and estimable
B. The degree of uncertainty
C. The present condition suggesting a liability
D. The outcome of a future event

19. On September 1, 2017, Company B signed a $7,392, two-year non-interest-bearing note payable in full on August 31, 2019. Company B received $6,000 cash. What was the yield or effective rate of interest rounded to the nearest whole percent?
A. 11 percent
B. 14 percent
C. 18 percent
D. 23 percent

20. VCR Company owed a $73,311 debt due on January 1, 2012. An agreement was reached to pay it off in three equal annual payments of $30,000 each, starting on December 31, 2012. The interest rate was 11 percent. The balance in the liability account of VCR Company on January 1, 2014 is (round annual payment to nearest $1):
A. $27,026
B. $51,875
C. $73,311
D. $90,000

Answer 1