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136 all of the following statements related to current liabilities for u s gaap and 4296268

 

136.All of the following statements related to current liabilities for U.S. GAAP and IFRS are true except:  
 
 

A.The definitions and characteristics of current liabilities are broadly similar for both U.S. GAAP and IFRS.

B.The term provision is typically used under IRFS to refer to what is titled liability under U.S. GAAP.

C.Because tax regulatory systems of countries are different, the approach to recording taxes is totally different.

D.When there is little uncertainty surrounding current liabilities, both require companies to record them in a similar manner.

E.When there is a known current obligation that involves an uncertain amount, but one that can be reasonable estimated, both require similar treatment.

137.All of the following statements related to recording warranty expense are true except
 
 

A.Recording estimated warranty expense complies with the full disclosure principle.

B.Warranty expense should be recorded in the period when the warranty service is performed.

C.Recording estimated warranty expense complies with the matching principle.

D.The seller reports a warranty obligation as a liability.

E.Warranty costs are probable and the amount can be estimated.

138.During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the estimated warranty expense for the month is: 
 
 

A.Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.

B.Debit Warranty Expense $5,000; credit Estimated Warranty Liability $5,000.

C.Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.

D.Debit Estimated Warranty Liability $9,400; credit Warranty Expense $9,400.

E.Debit Estimated Warranty Liability $17,800; credit Warranty Expense $17,800.

139.During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the customer warranty repairs is: 
 
 

A.Debit Warranty Expense $17,800; credit Estimated Warranty Liability $17,800.

B.Debit Warranty Expense $9,400; credit Estimated Warranty Liability $9,400.

C.Debit Warranty Expense $14,400; credit Estimated Warranty Liability $14,400.

D.Debit Estimated Warranty Liability $9,400; credit Parts Inventory $9,400.

E.Debit Estimated Warranty Liability $17,800; credit Parts Inventory $17,800.

140.During June, Vixen Fur Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month. The entry to record the estimated warranty provision at the end of the month is: 
 
 

A.Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.

B.Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.

C.Debit Warranty Expense $25,500; credit Estimated Warranty Liability $25,500.

D.Debit Estimated Warranty Liability $14,000; credit Warranty Expense $14,000.

E.Debit Estimated Warranty Liability $11,500; credit Warranty Expense $11,500.

141.During June, Vixen Fur Company sells $850,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 3% of the selling price. Customers returned $14,000 of merchandise for warranty replacement during the month. The entry to settle the customer warranties is: 
 
 

A.Debit Warranty Expense $11,500; credit Estimated Warranty Liability $11,500.

B.Debit Estimated Warranty Liability $25,500; credit Warranty Expense $25,500.

C.Debit Warranty Expense $14,000; credit Estimated Warranty Liability $14,000.

D.Debit Estimated Warranty Liability $11,500; credit Merchandise Inventory $11,500.

E.Debit Estimated Warranty Liability $14,000; credit Merchandise Inventory $14,000.

142.If a company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers, the receipt of cash would be journalized as: 
 
 

A.Debit Cash $45,000; credit Unearned Revenue $45,000.

B.Debit Unearned Revenue $45,000; credit Sales $45,000.

C.Debit Cash $45,000, credit Sales $45,000.

D.Debit Sales $45,000, credit Unearned Revenue $45,000.

E.Debit Prepaid Subscriptions $45,000, credit Sales $45,000.

143.A company has advance subscription sales totaling $45,000 for the upcoming year when four quarterly journals will mailed to customers. When the company mails the first quarterly journal to customers, it should record: 
 
 

A.Debit Prepaid Subscriptions $33,750; credit Unearned Revenue $33,750.

B.Debit Unearned Revenue $45,000; credit Cash $45,000.

C.Debit Cash $11,250, credit Sales $11,250.

D.Debit Unearned Revenue $11,250, credit Sales $11,250.

E.Debit Prepaid Subscriptions $11,250, credit Sales $11,250.

144.Carson Company faces a probable loss on a pending lawsuit where the amount of the loss is estimated to be $500,000. The journal entry to recognize the potential loss is: 
 
 

A.Debit Prepaid Legal Expense $500,000; credit Contingent Legal Liability $500,000.

B.Debit Legal Expense $500,000; credit Lawsuit Payable $500,000.

C.Debit Contingent Legal Expense $500,000, credit Contingent Legal Liability $500,000.

D.Debit Lawsuit Payable $500,000, credit Contingent Legal Liability $500,000.

E.No journal entry is required.

145.On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What amount of interest expense is accrued at December 31 on the note? 
 
 

A.$0

B.$80

C.$320

D.$960

E.$160

146.On December 1, Watson Enterprises signed a $24,000, 60-day, 4% note payable as replacement of an account payable with Erikson Company. What is the journal entry that should be recorded upon signing the note?  
 
 

A.Debit Accounts Receivable $24,000; credit Notes Receivable $24,000

B.Debit Accounts Payable $24,000; credit Notes Payable $24,000

C.Debit Accounts Payable $24,160; credit Notes Payable $24,160

D.Debit Notes Payable $24,000; debit Interest Expense $160; credit Accounts Payable $24,160

E.Debit Notes Payable $24,000; debit Interest Expense $160; credit Cash $24,160

147.On September 1, Knack Company signed a $50,000, 90-day, 5% note payable with Central Savings Bank. What is the journal entry that should be recorded by Knack upon maturity of the note?  
 
 

A.Debit Interest Expense $625; credit Interest Payable $625.

B.Debit Notes Payable $50,000; credit Interest Revenue $625; credit Cash $49,375.

C.Debit Cash $50,625; credit Notes Receivable $50,625.

D.Debit Notes Payable $50,625; credit Cash $50,625.

E.Debit Notes Payable $50,000; debit Interest Expense $625; credit Cash $50,625.

148.A company's has fixed interest expense of $52,000, income taxes expense of $121,000, and net income of $281,000. The company's times interest earned ratio equals: 
 
 

A.8.73.

B.5.40.

C.7.73.

D.2.33.

E.0.11.

 

 

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