Question

Multiple Choice Questions
1.The balance in Ash wood Company’s accounts payable account at December 31, 2016, was $1,200,000 before any necessary' year-end adjustment relating to the following:
• Goods were in transit from a vendor to Ashwood on December 31, 2016. The invoice cast was $85,000, and the goods were shipped FOB shipping point on December 29, 2016. The goods were received on January' 2,2017.
• Goods shipped FOB shipping point on December 20, 2016, from a vendor to Ashwood were lost in transit. The invoice cost was $40,000. On January' 5, 2017, Ashwood filed a $40,000 claim against the common carrier.
• Goods shipped FOB destination on December 22, 2016, from a vendor to Ashwood were received on January' 6, 2017. The invoice cost was $20,000. What amount should Ashwood report as accounts payable on its December 31, 2016, balance sheet?
a. $1,260,000
b. $1,285,000
c. $1,325,000
d. $1,345,000
2. On September 1,2016, a company borrowed cash and signed a 1-year, interest-bearing note on which both the principal and interest arc payable on September 1, 2017. How will the note payable and the related interest be classified in the December 31, 2016, balance sheet?
Note Payable Accrued Interest
a. Current liability ..... Noncurrent liability
b. Noncurrent liability .. Current liability
c. Current liability ..... Current liability
d. Noncurrent liability .. No entry
3. When a company' receives a deposit from a customer to protect itself against nonpayment for future services, the deposit should be classified by' the company as:
a. Revenue
b. A liability'
c. Part of the allowance for doubtful accounts
d. A deferred credit deducted from accounts receivable
4. Bronson Apparel Inc. operates a retail store and must determine the proper December 31, 2016, year-end accrual for the following expenses:
• The store lease calls for fixed rent of $1,000 per month, payable at the beginning of the month, and additional rent equal to 6% of net sales over $200,000 per calendar year, payable on January' 31 of the following year. Net sales for 2016 arc $800,000.
• Bronson has personal property' subject to a city property' tax. The city's fiscal year runs from July' 1 to June 30, and the tax is payable on June 30. Bronson estimates that its personal property' tax will amount to $6,000 for the city's fiscal year ending June 30, 2017. In its December 31,2016, balance sheet, Bronson should report accrued expenses of:
a. $39,000
b. $42,000
c. $51,000
d. $54,000
5. Alorgan Company determined that
(1) it has a material obligation relating to employees’ rights to receive compensation for future absences attributable to employees’ services already' rendered,
(2) the obligation relates to rights that vest,
(3) payment of the compensation is probable. The amount of Morgan’s obligation as of December 31, 2016, is reasonably estimated for the following employee benefits:
Vacation pay ...... $ 100,000
Holiday pay ....... 25,000
What total amount should Morgan report as its liability for compensated absences on its December 31,2016, balance sheet?
a. $0
b. $25,000
c. $100,000
d. $125,000
6. All of Rolf Co.'s employees are entitled to two weeks of paid vacation for each foil year in Rolf’s employ. Unused vacation time can be accumulated and carried forward to succeeding years and will be compensated at the salary' in effect when the vacation is taken. Mary' Beal started her employment with Rolf on January' 1, 2016. As of December 31, 2016, when Beal's salary' was $500 per week, Beal had used none of her vacation time. As of December 2016, Rolf expects to give its employees 10% raises in July 2017. How much should Rolf report as a liability' at December 31, 2016, for Beal’s accumulated vacation time?
a. $0
b. $500
c. $1,000
d.$1,100
7. Which of the following is classified as an accrued payroll liability'?
8. Gain contingencies arc usually recognized in the income statement when:
a. Realized
b. Occurrence is reasonably' possible and the amount can be reasonably estimated
c. Occurrence is probable and the amount can be reasonably estimated
d. The amount can be reasonably estimated
9. How should a loss contingency that is reasonably possible and for which the amount can be reasonably estimated be reported?
10. During 2016, Lawton Company introduced a new line of machines that carry' a 3-year assurance type warranty' against manufacturer’s defects. Based on industry' experience, warranty' costs are estimated at 2% of sales in the year of sale, 4% in the year after sale, and 6% in the second year after sale. Sales and actual warranty' expenditures for the first 3-year period were as follows:
What amount should Lawton report as a liability' at December 31,2018?
a. $0
b. $21,000
c. $84,000
d. $105,000


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  • CreatedOctober 05, 2015
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