Question

11. A brewing company operating in an Ontario city experiencing water shortages received its water bill for December 2018, on December 31, 2018. The bill ($8,000) represents the cost of water used in December to make its product. The company will not publish the 2018 financial statements until February 2019. Therefore, the adjusting entry as of December 31, 2018 includes which of the following?
A. cr. utilities payable $8,000
B. cr. cash $8,000
C. cr. utilities expense $8,000
D. no adjusting entry needed because the bill will not be paid until January 2014

12. A short-term note payable may include all of the following except:
A. Trade notes payable.
B. Non trade notes payable.
C. A current portion of a long-term liability.
D. Unearned revenue.

13. A firm sold $100,000 worth of goods during 2018. The firm extends warranty coverage on these goods. Historically, warranty costs have averaged 2% of total sales. During 2018, the firm incurred $1,000 to service goods sold in 2017 and $200 to service goods sold in 2018. What is warranty expense for 2018?
A. $200
B. $1,200
C. $2,000
D. $3,200

14. On November 7, 2014 local residents sued Brimley Corporation for excess chemical emissions that caused some of them to seek medical attention. The total lawsuit is $8,000,000. Brimley Corporation's lawyers believe that the lawsuit will be successful and that the amount to be paid to the residents will be $4,000,000. On its December 31, 2014 financial statements Brimley should:
A. Accrue a provision loss of $8,000,000 with no financial statement disclosure necessary.
B. Accrue a provision loss of $4,000,000 and note disclose.
C. Do nothing as the lawsuit has not yet ended.
D. Simply disclose the details regarding the lawsuit in a note.

15. Constructive obligations may arise from:
A. Accrued Liabilities resulting from operations.
B. Warranty obligations.
C. Notes Payable.
D. Unearned Revenues.

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

11 Answer A. Cr utilities payable $ 8000 As on december 31 no cash payment is made, and $8000 accrued for the month of december and become payable on 31 Dec Therefore Utilities payable should be credited 12 Answer D. Unearned Revenue Unearned revenue is not payable to any outside party Therefore unearned revenue can't be a part of short term note payable 13 Answer C. 2000 warranty expenses-1,00,000 * 296-2000 Journal entry will be Warranty Expenses A/c DR 2000 To Accured Warranty liability 2000 14 Answer B. Accrue a Provision loss of $ 4,000,000 and note disclose Lawsuit of $ 4,000,000 is expected by lawyer that company should pay to the residents. It is the provision not a contingent liability Therefore Company should Accrue a Provision loss of $4,000,000 and note disclose