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Exam 2: Current Liabilities

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Question 1

True/False

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The accounting for a contingent liability is the same as for a provision.

A) True
B) False

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Question 2

Multiple Choice

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Uncertainties such as doubtful accounts

A) Are not provisions because they are future events not arising out of past transactions
B) Are provisions because they are future events arising from past transactions
C) Should not be disclosed
D) Are provisions because the amounts are uncertain
E) Are not provisions since they relate to normal business activities

F) A) and B)
G) C) and D)

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Question 3

Multiple Choice

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West Coast Outdoor Co.sold $22,000 worth of trampolines with a one-year warranty.The company estimates that 2% of the sales will result in warranty work.West Coast Outdoor Co.should

Gross pay is the same as net pay.

Estimated liabilities are also referred to as provisions.

The employer should record payroll deductions as

The difference between the amount received from a note payable and the amount repaid is

The receipt of $6,000 in advance ticket sales would be recorded as

Accounts payable

Kirland performed warranty repair work for a customer which cost $800.The journal entry to record the work should be a debit of $800 to Warranty Expense and a $800 credit to Estimated Warranty Liability.

A liability exists because of a past event that creates a future obligation for future sacrifices.

On June 5,Scavenger Company borrowed $125,000 from BC Bank.The loan had an interest rate of 10% and was due in 90 days.Scavenger Company's fiscal year-end is December 31.Prepare the journal entry to record the payment of the note on Scavenger's books.

Trade accounts payable are amounts owed to suppliers for products or services purchased on credit.

A combined GST and PST rate of 12% applied to taxable supplies is called

Elder Helpers Ltd estimates its income taxes at 35% of pre-tax income.For the quarter ended September 30,pre-tax income was $220,000.Prepare the journal entry to record the estimated income taxes and the subsequent remittance on October 5.

A company sells its product subject to a warranty that covers the cost of parts and labour for repairs during the six months after sale.warranty costs are estimated to be 3.5% of sales for parts,and 1.5% of sales for labour.During the month of June,the company performed warranty work and used $8,000 worth of parts and paid $4,000 in wages for labour to do the warranty work.Sales for June amounted to $450,000. (1)What account should be debited for the $4,000 in labour? (2)What should be the amount of estimated warranty expense for June? (3)If the Estimated Warranty Liability account had a $10,000 credit balance on May 31,what should be the account balance as of June 30?

Sales taxes payable is credited,and cash is debited when firms send sales taxes collected from customers to the government.

Long-term liabilities

During November 2021,Sunset Airlines sold out all of its eight flights going from Toronto to Cuba.Two flights depart in December 2021 and six flights depart in January 2022.Sunset collected $1,960,000 in November 2021 for the flights.Sunset's year end is December 31 Required: What adjusting entry would be needed to recognize revenue for 2021? Date the entry.What would be the value of the liability on Sunset's Balance Sheet at December 31,2021? State if the liability is current or non-current.

On November 16,2020,Kinsmen Sports gave Source for Sports a 120-day,8%,$130,000 note payable to extend a past due account payable.What amount of interest expense should Source for Sports report for calendar 2020?