Q1. (__________ / Noncurrent) liabilities are obligations due within one year or within the company’s normal operating cycle if longer. Obligations due beyond that time are classified as (current / __________) liabilities.
Q2. The purchase of inventory will usually increase the (__________ / notes / mortgage) payable account.
Q3. Warranty costs related to Year 5 sales total (__________/ $510 / $785) million and warranty costs expected to be incurred in the future total ($275 __________/ $785) million. These amounts are (known / __________).
Q4. There is ($271 / $631 / __________) million of total debt outstanding (not including bonds). Of this amount, the company plans to pay (__________/ $631 / $902) million during the following year and pay ($271 / __________/ $902) million in later years.
Q5. When bonds payable are issued, they are recorded at their (face / __________) value. After issuance, they are reported at their (present / fair market / __________) value. The above bond has a current carrying value of __________million that will continue to (__________/ decrease) until maturity. At maturity, the issuing corporation will pay __________million to the holder of the bond.
Q6. The bond payable was issued at a discount because the market interest rates were (__________ / equal to / lower than) 8%, and therefore, the actual cost of borrowing is (__________/ equal to / less than) 8%. This year’s interest payment totaled ($156 / __________/ $220 / $250) while this year’s cost of borrowing totaled ($156 / $200 / __________/ $250).
Q7. Post-retirement benefits are expensed and recorded as a liability in the year of (__________/ retirement). This is an application of the (__________/ cost / reliability) principle.