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Exam 8: Current Liabilities

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Question 21

Multiple Choice

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Region Jet has a $50 million liability at December 31,2018,of which $10 million is payable in 2019.In its December 31,2018 balance sheet,the company reports the $50 million debt as a:

A) $50 million current liability on the balance sheet.
B) $50 million long-term liability on the balance sheet.
C) $10 million current liability and a $40 million long-term liability on the balance sheet.

D) None of the above
E) A) and B)

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Question 22

True/False

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The balance in the Warranty Liability account is always equal to Warranty Expense.The Warranty Liability account is increased by warranty expense,but it is also reduced over time by actual warranty expenditures.

A) True
B) False

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Question 23

Multiple Choice

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In January,2018,Summit Co.sells a gift card for $50 and receives cash.In February,2018,the customer comes back and spends $20 of their gift card on a water bottle.What would be the appropriate journal entry for the purchase of the water bottle?

Unified Airlines is being sued by Northeast Airlines for $5,000,000.At the end of the year,Unified feels it is probable that it will pay $5,000,000 at some point in the following year.What should Unified and Northeast record at the end of the year concerning the lawsuit?

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and paperwork.

The Pita Pit borrowed $100,000 on November 1,2018,and signed a six-month note bearing interest at 12%.Principal and interest are payable in full at maturity on May 1,2019.In connection with this note,The Pita Pit should report interest expense in 2019 for the amount of:

The Route 66 Gift Shop,which records sales and sales tax separately,had sales on account of $1,500 and cash sales of $1,000.The state sales tax is 8%.The journal entry to record the sales would include a:

Strikers,Inc.sells soccer goals to customers over the Internet.History has shown that 2% of Strikers' goals will need repair under the warranty program.For the year,Strikers has sold 4,000 goals and 45 have been repaired.If the estimated cost to repair a goal is $200,what would be the warranty expense for the year?

When a company borrows cash from a bank promising to repay the amount borrowed plus interest,the borrower reports its liability as notes payable.

Which of the following is not a liability?

The sale of gift cards by a company is a direct example of:

On September 1,2018,Daylight Donuts signed a $100,000,9%,six-month note payable with the amount borrowed plus accrued interest due six months later on March 1,2019.Daylight Donuts records the appropriate adjusting entry for the note on December 31,2018.In recording the payment of the note plus accrued interest at maturity on March 1,2019,Daylight Donuts would

Talks-A-Lot,Inc.sells cell phones to customers and expects that 10% of phones sold will be returned for repair under its warranty program.The average repair cost is $75 per phone.For 2018,Talks-A-Lot has sold 750 cell phones and has repaired 30 of them as of December 31,2018.What amount of warranty liability should be reported at December 31,2018?

Gain contingencies usually are recognized in a company's income statement when:

Quick assets include only cash,short-term investments,and accounts receivable.

Which of the following is not a current liability?

If a 6% sales tax is recorded together with sales revenue in the sales account and the balance at the end of the month is $5,300,how much sales tax is payable?

Given a choice,most managers would choose to record an obligation as long-term rather than current.

Which of the following are included in an employer's payroll tax expense?

If a company borrows from another company rather than from a bank,the note is referred to as commercial paper.