Question

1. A company sells its product at a price of $ 75 and separates it, assigning $ 70 to the product and $ 5 to the guarantee. When you sell a product, the company debits cash for $ 75 and credits:
a. Sales for $ 75
b. Sales for $ 70 and “Unearned warranty revenue” for $ 5
c. Sales for $ 70 and “Estimated warranty liability” for $ 5
d. Sales for $ 70 and “Warranty expense” for $ 5

2. Under what conditions is the current portion of long-term debt NOT reported as current debt?

a. If you are going to pay with non-current assets.
b. If it is going to be paid with the issuance of new non-current debt.
c. If it is to be paid with common shares of the company.
d. All of the above are correct.

3. Which of the following alternatives represents a payroll withholding that the employer must recognize as debt in their statements?

a. Federal unemployment insurance (FUTA).
b. Individual income tax.
c. State unemployment insurance (SUTA).
d. Employer contribution to employee health insurance

4. Peterson Photoshop sold $ 1,000 worth of gift cards in a special promotion on October 15, 2020 and sold $ 1,500 worth of gift cards in another special promotion on November 15, 2020.

Of the cards sold in October, $ 100 was redeemed (used by customers) in October, $ 250 in November, and $ 300 in December.

Of the cards sold in November, $ 150 was redeemed in November and $ 350 was redeemed in December.

Peterson views the likelihood of a gift card being used (redeemed) as remote if the card has not been redeemed within two months. Determine the total unearned income that the company will report in the Statement of Financial Position for 12/31/2020.

a. $ 0.
b. $ 1,000.
c. $ 1,350.
d. $ 1,500.

5. On December 31, 2019, GMC had a note payable with a book value of $ 100,000. GMC has faced financial difficulties that have not allowed it to meet the payment of this debt. Suppose that on the mentioned date the bank agreed to change the terms of the loan as follows: the principal (maturity value) was reduced to $ 80,000, the maturity date was changed to December 31, 2021, and the contractual interest rate was reduced from 15% to 10%. Determine the effect of this restructuring of debt on GMC's Net Income on 12/31/2019.

a. GMC is going to report a profit of $ 20,000.
b. GMC will report a profit equal to 5% of the principal.
c. GMC is going to report a profit of $ 4,000.
d. When the terms of the contract are adjusted, the debtor does NOT report earnings

Answer 1

Answer to Question no. 1:-

b. Sales for $ 70 and “Unearned warranty revenue” for $ 5

Reason:- As per the concept of prudence, income should be recognised in books, when all the conditions for sale have been met. When "Warranty Period" gets over then only revenue will be recognised in books, until then it will be accounted as "Unearned warranty revenue" and will be shown under short term Provisions.

Answer to Question no. 2:-

d. All of the above are correct.

Reason:- As per the Standards on Accounting and followed accounting principles, all the three options are correct.

Answer to Question no. 3:-

a. Federal unemployment insurance (FUTA).
c. State unemployment insurance (SUTA).

Reason:- As per my knowledge, both "a" & "c" should be correct Answer.

Answer to Question no. 4:-

a. $ 0.