Professional Documents
Culture Documents
)
Answer No. Description
b 124. Calculate liability for premiums.
d 125. Calculate warranty liability.
b 126. Calculate liability for premiums.
d 127. Determine premiums expense for the year.
d 128. Calculate estimated liability for premiums.
d 129. Calculate estimated liability for premiums.
b 130. Determine amount to accrue as a loss contingency.
d 131. Accrue warranty expense for the year.
a 132. Calculate warranty liability.
d 133. Determine amount to accrue as a gain contingency.
b 134. Calculate liability for unredeemed coupons.
c 135. Calculate the quick (acid-test) ratio.
EXERCISES
Item Description
E13-147 Notes payable.
E13-148 Payroll entries.
E13-149 Compensated absences.
E13-150 Contingent liabilities.
E13-151 Premiums.
E13-152 Premiums.
PROBLEMS
Item Description
P13-153 Accounts and notes payable.
P13-154 Refinancing of short-term debt.
P13-155 Premiums.
P13-156 Warranties.
CHAPTER LEARNING OBJECTIVES
1. Describe the nature, type, and valuation of current liabilities.
4. Identify the criteria used to account for and disclose gain and loss contingencies.
3. Magazine subscriptions and airline ticket sales both result in unearned revenues.
4. Discount on Notes Payable is a contra account to Notes Payable on the balance sheet.
5. All long-term debt maturing within the next year must be classified as a current liability on
the balance sheet.
6. A short-term obligation can be excluded from current liabilities if the company intends to
refinance it on a long-term basis.
7. Many companies do not segregate the sales tax collected and the amount of the sale at
the time of the sale.
8. A company must accrue a liability for sick pay that accumulates but does not vest.
9. Companies report the amount of social security taxes withheld from employees as well as
the companies’ matching portion as current liabilities until they are remitted.
10. Accumulated rights exist when an employer has an obligation to make payment to an
employee even after terminating his employment.
11. Companies should recognize the expense and related liability for compensated absences
in the year earned by employees.
12. Companies should accrue an estimated loss from a loss contingency if information
available prior to the issuance of financial statements indicates that it is probable that a
liability has been incurred.
13. A company discloses gain contingencies in the notes only when a high probability exists
for realizing them.
14. The expected profit from a sales type warranty that covers several years should all be
recognized in the period the warranty is sold.
15. The fair value of an asset retirement obligation is recorded as both an increase to the
related asset and a liability.
16. The cause for litigation must have occurred on or before the date of the financial
statements to report a liability in the financial statements.
17. Under the expense warranty approach, companies charge warranty costs only to the
period in which they comply with the warranty.