loader  Loading... Please wait...

Question(s) / Instruction(s):

21.     A liability for compensated absences such as vacations, for which it is expected that employees will be paid, should
a.     be accrued during the period when the compensated time is expected to be used by employees.
          b.     be accrued during the period following vesting.
          c.     be accrued during the period when earned.
          d.     not be accrued unless a written contractual obligation exists.

     22.     The amount of the liability for compensated absences should be based on

  1.      the current rates of pay in effect when employees earn the right to compensated absences.
  2.      the future rates of pay expected to be paid when employees use compensated time.
  3.      the present value of the amount expected to be paid in future periods.

          a.     1.
          b.     2.
          c.     3.
          d.     Either 1 or 2 is acceptable.

     23.     Which of the following sets of conditions would give rise to the accrual of a contingency under current generally accepted accounting principles?
          a.     Amount of loss is reasonably estimable and event occurs infrequently.
          b.     Amount of loss is reasonably estimable and occurrence of event is probable.
          c.     Event is unusual in nature and occurrence of event is probable.
          d.     Event is unusual in nature and event occurs infrequently.

     24.     Mark Ward is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2004, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Ward had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Ward in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Ward appears inclined to accept the Railroad's offer. The Railroad's 2004 financial statements should include the following related to the incident:
          a.     recognition of a loss and creation of a liability for the value of the land.
          b.     recognition of a loss only.
          c.     creation of a liability only.
          d.     disclosure in note form only.

     25.     A contingency can be accrued when
          a.     it is certain that funds are available to settle the disputed amount.
          b.     an asset may have been impaired.
c.     the amount of the loss can be reasonably estimated and it is probable that an asset has been impaired or a liability incurred.
d.     it is probable that an asset has been impaired or a liability incurred even though the amount of the loss cannot be reasonably estimated.

     26.     A contingent liability
          a.     definitely exists as a liability but its amount and due date are indeterminable.
          b.     is accrued even though not reasonably estimated.
          c.     is not disclosed in the financial statements.
          d.     is the result of a loss contingency.
     27.     To record an asset retirement obligation (ARO), the cost associated with the ARO is
          a.     expensed.
          b.     included in the carrying amount of the related long-lived asset.
          c.     included in a separate account.
          d.     none of these.

     28.     A company is legally obligated for the costs associated with the retirement of a long-lived asset
          a.     only when it hires another party to perform the retirement activities.
          b.     only if it performs the activities with its own workforce and equipment.
          c.     whether it hires another party to perform the retirement activities or performs the activities itself.
          d.     when it is probable the asset will be retired.

     29.     Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty
          a.     should be reported as long-term.
          b.     should be reported as current.
          c.     should be reported as part current and part long-term.
          d.     need not be disclosed.

     30.     Lopez Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2004. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Lopez recall all cans of this paint sold in the last six months. The management of Lopez estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation?
          a.     No recognition
          b.     Note disclosure only
          c.     Operating expense of $800,000 and liability of $800,000
          d.     Appropriation of retained earnings of $800,000

     31.     Information available prior to the issuance of the financial statements indicates that it is probable that, at the date of the financial statements, a liability has been incurred for obligations related to product warranties. The amount of the loss involved can be reasonably estimated. Based on the above facts, an estimated loss contingency should be
          a.     accrued.
          b.     disclosed but not accrued.
          c.     neither accrued nor disclosed.
          d.     classified as an appropriation of retained earnings.

     32.     Accrued liabilities are disclosed in financial statements by
          a.     a footnote to the statements.
          b.     showing the amount among the liabilities but not extending it to the liability total.
          c.     an appropriation of retained earnings.
          d.     appropriately classifying them as regular liabilities in the balance sheet.

     33.     The numerator of the acid-test ratio consists of
          a.     total current assets.
          b.     cash and marketable securities.
          c.     cash and net receivables.
          d.     cash, marketable securities, and net receivables.
     *34.     Which of the following is not a permissible method of calculating a bonus to an employee?
          a.     The bonus is based on income before deductions for the bonus and income taxes.
b.     The bonus is based on income after deduction of the bonus but before deduction of income taxes.
          c.     The bonus is based on income after deductions for the bonus and income taxes.
          d.     All of these are permissible.

Find Similar Answers by Subject

Student Reviews

Rate and review your solution! (Please rate on a Scale of 1 - 5. Top Rating is 5.)

Expert's Answer
Download Solution:

This solution includes:

  • Plain text
  • Cited sources when necessary
  • Attached file(s)
  • Solution Document(s)

Reach Us