101) During the year, L&M Leather Goods sold 1,000,000 reversible belts under a new sales
promotional program. Each belt carried one rebate certificate which entitles the customer to a
$4.00 cash refund when the rebate is submitted for redemption. L&M estimates that 70% of the
rebates will be redeemed. 500,000 rebates had been submitted for redemption during the year. At
December 31, L&M should report a liability for unredeemed rebate certificates of:
A) $700,000.
B) $800,000.
C) $1,000,000.
D) $2,800,000.
102) Which of the following may create employer liabilities in connection with their payrolls?
A) Employee withholding taxes.
B) Employee voluntary deductions.
C) Employee fringe benefits.
D) All of these answer choices are correct.
103) Barbara Muller Services (BMS) pays its employees monthly. The payroll information listed
below is for January 2018, the first month of BMS’s fiscal year. Assume none of the employees’
earnings reached $7,000 during the month.
Salaries
$
80,000
Federal income taxes to be withheld
16,000
Federal unemployment tax rate
0.80
%
State unemployment tax rate (after FUTA deduction)
5.40
%
Social security tax rate
6.2
%
Medicare tax rate
1.45
%
The journal entry to record payroll for the January 2018 pay period will include a debit to payroll
tax expense of:
A) $6,120.
B) $4,960.
C) $11,080.
D) $57,880.
Salaries and wages expense (total amount incurred)
80,000
Withholding taxes payable (federal income tax)
16,000
Social Security taxes payable ($80,000 × 6.2%)
Medicare taxes payable ($80,000 × 1.45%)
Salaries and wages payable (net pay)
57,880
Payroll tax expense (total)
11,080
amount)
amount)
0.8%)
State unemployment tax payable ($80,000 × 5.4%)
Listed below are five terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the most correct term.
A) A loss contingency accrued in the period of related sales.
B) Confirming event is likely to occur.
C) Liabilities when received.
D) Most common temporary financing arrangement.
E) Requires collateral.
104) Short-term note
105) Warranty liability
106) Advances from customers
107) Probable
108) Secured loan
Listed below are five terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the most correct term.
A) Expenses incurred but not yet paid.
B) Due on demand.
C) Contra liability.
D) A third party liability.
E) Accrues with passage of time.
109) Sales tax payable
110) Callable
111) Accrued liabilities
112) Discount on notes payable
113) Interest payable
Listed below are five terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the most correct term.
A) More than remote but less than likely.
B) Liabilities until refunded.
C) Not recorded until realized.
D) Informal borrowing agreements.
E) Face amount x rate x time.
114) Noncommitted lines of credit
115) Gain contingencies
116) Deposits from customers
117) Reasonably possible
118) Interest paid on debt
Listed below are five terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the most correct term.
A) Larger than that stated on discounted notes.
B) Sales of receivables.
C) May include items that are not legally enforceable.
D) Evaluated for recognition only if an unfavorable outcome is probable.
E) Occur in the current year before prior year financial statements are issued.
119) Subsequent events
120) Unasserted claims
121) Accounting liabilities
122) Factoring
123) Effective interest
Listed below are five terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the most correct term.
A) The formal credit instrument is the invoice.
B) Often require compensating balance.
C) Effective interest higher than stated interest.
D) Recorded if probable and amount is known or reasonably estimable.
E) Use accounts receivable as collateral.
124) Noninterest-bearing notes
125) Committed lines of credit
126) Loss contingencies
127) Secured loans
128) Accounts payable
Listed below are five terms followed by a list of phrases that describe or characterize each of the
terms. Match each phrase with the most correct term.
A) Avoids registration with SEC.
B) Payable with current assets.
C) Required for contingencies.
D) Short-term debt to be refinanced with long-term bonds payable.
E) Present value of interest plus present value of principal.
129) Disclosure notes
130) Commercial paper
131) Current liabilities
132) Usual valuation of liabilities
133) Long-term liabilities
Indicate the way each of the items listed below should be reported in a balance sheet at
December 31, 2018. Match each phrase with the correct term.
A) A material gain contingent on a future event that appears exceedingly likely.
B) Unassessed penalty with a reasonable possibility of being asserted, in which case a
determinable payment is probable.
C) A penalty assessment that probably will be asserted by the EPA, in which case a determinable
payment is probable.; An extremely likely loss due to an event that occurred previously and
whose amount is unknown but estimable.
134) Accrue liability
135) Disclosure note only
136) Not reported
55
Listed below are five terms followed by a list of phrases that describe or characterize five of the
terms related to accounting for contingent liabilities under IFRS. Match each phrase with the
correct term.
A) How present values affect the measurement of contingent liabilities under IFRS.
B) Treatment of contingent gains under IFRS.
C) The amount IFRS would accrue given a range of equally likely outcomes.
D) How IFRS refers to an accrued liability that would generally be referred to as an “accrued
contingent loss” under U.S. GAAP.
E) Definition of “probable” under IFRS.
137) Contingent gains are not accrued unless virtually certain
138) More likely than not
139) Mid-point of the range
140) Report at present value whenever time value of money is material
141) Provision
Indicate the way each of the items listed below should be reported in a balance sheet at
December 31, 2018. Match each phrase with the correct accounting treatment.
A) Estimated cost of quality-assurance warranty.; Unasserted assessment of penalty that
probably will be asserted, in which case there would probably be a loss in six months.; A
determinable loss from a past event that is contingent on a future event that appears extremely
likely to occur in three months.
B) A material gain contingent on a future event that appears extremely likely to occur in three
months.
C) Unasserted assessment of penalty with a reasonable possibility of being asserted, in which
case there would probably be a loss in 13 months.
142) Disclosure note only
143) Not reported
144) Current liability
Match each of the items listed below with how it should be reported in a balance sheet at
December 31, 2018.
A) Disclosure note only
B) Current liability
C) Long-term liability
145) Customer advances.
146) Noncommitted line of credit.
147) Commercial paper.
148) Note due June 9, 2019.
149) Accounts payable.
150) Interest accrued on note, Dec. 31, 2018.
151) Short-term bank loan to be paid with proceeds of sale of common stock.
Match the way each of the items listed below with how it should be reported in a balance sheet at
December 31, 2018.
A) Current liability
B) Not reported
C) Disclosure note only
D) Long-term liability
152) Customer advances.
153) Noncommitted line of credit.
154) Commercial paper.