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Exam 11: Current Liabilities and Contingencies

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Question 31

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What are the three broad categories of liabilities?

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The three broad categories of ...

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Question 32

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A company,using a perpetual inventory system,sells goods on credit for $10,000.The applicable PST rate is 5% and the cost of goods sold was $6,000.Sales taxes are remitted on a monthly basis.Prepare the necessary journal entries for this transaction.

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Question 33

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Explain the meaning of the following terms: "financial guarantee" contract and "onerous" contract

Which statement about deferred revenue is correct?

Why are taxes payable not classified as financial liabilities?

Which of the following is correct about a "liability" under IFRS Framework?

Which of the following characteristic is required for a liability under IFRS Framework?

A clothing store maintains a loyalty program for its customers.For every purchase,members receive points that do not expire.In fiscal 2016,the store made sales of $1 million and awarded 50,000 points that have a fair value of $50,000.The company estimates that approximately 75% of these points will be redeemed by members.Members redeemed 10,000 points in fiscal 2017. Provide the necessary journal entries for fiscal 2015 and 2016.

For a $200,000 trade payable with terms of 2/15,net 50,how much would be reported as "purchase discount lost" under the net method if a payment was made after 60 days?

Which statement about contingencies is correct?

Which statement about contingent liabilities is correct?

Which statement about contingent assets is correct?

Which of the following characteristic is required for a "liability" under IFRS Framework?

St.John Laurulry (SJL)recently hired Huck as its payable clerk,a position that has been vacant for two months.While the other accounting staff have taken care of the "must do's," there are a number of transactions that have not yet been recorded. ∙ Nov.15,2017-SJL purchases $8,000 supplies inventory on account.The terms offered are 2/10,net 30. ∙ Nov.22,2017-SJL purchases 10 washing machines.SJL issues a $3,000 non-interest bearing note payable due on 01/15/18. ∙ Nov.28,2017-SJL borrows $131,400 from the bank.SJL signs a demand note for this amount and authorizes the bank to take the interest payments from its bank account.Interest is payable monthly at 10% per annum. ∙ Dec.18,2017-SJL purchases $1,000 supplies inventory on account.The terms offered are 2/10,net 30. ∙ Dec.21,2017-SJL purchases 15 dryers.SJL issues a $25,000 non-interest bearing note payable due on Dec.21,2018. ∙ Dec.22,2017-Huck pays the Nov.15,2017 and Dec.18,2017 invoices. ∙ Dec.31,2017-Huck processes the payroll for the month.The gross payroll is $80,000;$2,700 is withheld for the employees' Canada Pension Plan and Employment Insurance premiums. Other Info ∙ SJL uses the net method to record accounts payable. ∙ SJL's year-end is Dec.31 and interim statements are normally prepared on a monthly basis. ∙ Due to the vacancy in the accounting department,SJL's latest interim statements are for the period ended Oct.31,2017.The necessary accruals were made at that time. ∙ The market rate of interest for SJL's short-term borrowings is 10%. Required: a.Prepare journal entries to record the documented events and the necessary accruals for the months of November and December.Compute interest accruals based on the number of days,rather than months. b.Contrast the gross and net methods of accounting for trade payables.

For each independent situation: ∗× 1.A former employee of Melvin Minimarket Inc.sued the company for $900,000,alleging that the company owner sexually harassed her.Melvin's lawyers suggest that the lawsuit has a 30-40% probability of success and that,if successful,the plaintiff will be awarded between $400,000 and $500,000. 2.Leduc Pyrotechnics Ltd.received a $15,000 fee to guarantee the $800,000 bank indebtedness of Kenora Fireworks Inc.The fair value of the guarantee is initially estimated to be $15,000. 3.Montomery Syringes Co.sued a competitor for $800,000,alleging corporate espionage.Montomery's legal counsel believes that the company will be successful and will be awarded somewhere in the range of $650,000 to $800,000. Required: Describe how the event should be dealt with in the financial statements and explain why.Prepare all required journal entries.

Which is an example of a liability?

Sales made in fiscal 2016 for $50,000,000 include a 5 year warranty coverage.The estimated cost for warranty is expected to be 2% for the first 4 years and 5% for the last year.Determine how much warranty expense will be recorded in fiscal 2016.

Which statement is correct?

For a $100,000 trade payable with terms of 2/10,net 45,how much would be reported as "purchase discount lost" under the gross method if a payment was made after 60 days?

Which statement about contingencies is correct?