Question

17. Which of the following would appear on the statement of financial position as a current liability?

	a.	a probable loss in the amount of $4 million from an ongoing lawsuit
	b.	a possible loss in the amount of $4 million from an ongoing lawsuit
	c.	a probable loss from an ongoing lawsuit, the amount of which is not yet determinable
	d.	a lawsuit for $4 million for which the likelihood of loss is remote

18. Chastain Park Entertainment paid salaries expense of $350,000 during Year 1. However, additional salaries of $20,000 had been earned by employees, but not paid or recorded at December 31, Year 1.

Refer to Chastain Park Entertainment. Under the accrual basis of accounting, what is the total amount of salaries payable to be reported at December 31, Year 1?   a.  $0   b.  $20,000   c.  $350,000   d.  $370,000

19. Fiona’s Italian Market purchased a delivery truck for $25,000 at the beginning of Year 1. The truck has an estimated life of five years and an estimated residual value of $5,000. The company plans to use the straight-line depreciation method. At the beginning of Year 2, the company spent $4,000 to replace the truck’s transmission. This resulted in a two-year extension of useful life, but no change in residual value.

Refer to Fiona’s Italian Market. What is the amount of depreciation expense for Year 2?   a.  $2,667   b.  $3,333   c.  $4,167   d.  $4,800

20. On January 1, Year 1, Kaleidoscope Paint issued $500,000, 10-year, 9% bonds for $480,745. The bonds pay interest on June 30 and December 31. The market rate is 10%. The company plans to use the effective interest method of amortizing bond discounts and premiums.

Refer to Kaleidoscope Paint. What will be the cash payment on June 30, Year 1?   a.  $22,500   b.  $25,000   c.  $45,000   d.  $50,000

21. Selected financial data for Rescue Rooter are presented below:   Year 2 Year 1 Total liabilities $1,205,000 $952,000 Common shares 250,000 225,000 Paid-in capital in excess of par—common shares 150,000 135,000 Retained earnings 155,000 145,000

Refer to Rescue Rooter. What does the debt-to-equity ratio for Year 2 indicate?   a.  It is increasing, which may be a cause of concern for the company.   b.  It is increasing, which is always a good sign from the viewpoint of investors.   c.  It is decreasing, which may be a cause of concern for the company.   d.  It is decreasing, which is always a good sign from the viewpoint of investors.

22. Dietz Inc. sells merchandise on credit. If a customer pays its balance due within the discount period, what is the effect of the payment on Dietz’s accounting equation, assuming the sale has already been appropriately recorded?

	a.	Assets and shareholders’ equity decrease.
	b.	Assets and shareholders’ equity increase.
	c.	Assets decrease and liabilities increase.
	d.	Shareholders’ equity decreases and liabilities increase.

Answer 1

Qns-17	Option b - A possible loss in the amount
	of $4 million from an ongoing lawsuit.
	As loss amount is possible and certain so it needs to be shown
	in current liabilites.
Qns-18	Option b - $ 20000 is correct.
	Since salary is earned by employees but not recored or paid so it
	needs to be shown as salary payable under accural basis of
	accounting.
Qns-19	Option b - $ 3333 is correct.
	Below is working -
		Truck purchase price	25,000
		Residual price	5,000
		Net price	20,000
	Year 1	Depreciation/year	4,000
		Transmission cost	4,000
		Truck revised value	25000+4000
		Truck revised value	29,000
		Depreciation till date	4,000
		Residual price	5,000
		remaining life	6
	Year 2	Depreciation/year	(Revised value - residual price - Depreciation till date) / remaining life
		Depreciation/year	(29000-5000-4000)/6
		Depreciation/year	3,333
		Option B is correct	3,333
Qns-20		9% Bond Face Value	$500,000
		Interest Payment
		30-Jun	500000*9%/2		$22,500
		31-Dec	500000*9%/2		$22,500
		Option A - $ 22500 is correct.
Qns-21		Total equity
		Year 1	$        505,000
		Year 2	$        555,000
		Debt
		Year 1	$        447,000
		Year 2	$        650,000						ekkarill92 Next > < Previous Related Solutions 17. Which of the following would appear on the statement of financial position as a current... 17. Which of the following would appear on the statement of financial position as a current liability? a. a probable loss in the amount of $4 million from an ongoing lawsuit b. a possible loss in the amount of $4 million from an ongoing lawsuit c. a probable loss from an ongoing lawsuit, the amount of which is not yet determinable d. a lawsuit for $4 million for which the likelihood of loss is remote 18. Chastain Park Entertainment paid... Indicate all of the costs that would appear under Non-Current Assets on the Statement of Financial... Indicate all of the costs that would appear under Non-Current Assets on the Statement of Financial Position: a. Development costs for new products which conform to the six criteria for capitalization. b. New driveway to the office building. c. Costs to register trademarks. d. 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