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ACC 304 Chapter 13 Quiz

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ACC 304 Chapter 13 Quiz

1. 

Vista newspapers sold 6,000 of annual subscriptions at $125 each on September 1. How much unearned revenue will exist as of December 31?

2. 

To record an asset retirement obligation (ARO), the cost associated with the ARO is

3. 

The effective interest on a 12-month, zero-interest-bearing note payable of $300,000, discounted at the bank at 8% is

4. 

Which of the following items is a current liability?

5. 

In 2012, Payton Corporation began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows:

First year of warranty

 

2%

Second year of warranty

 

5%

Sales and actual warranty expenditures for 2012 and 2013 are presented below:

 

 

2012

 

2013

Sales

 

600,000

 

800,000

Actual warranty expenditures

 

20,000

 

40,000

What is the estimated warranty liability at the end of 2013?

6. 

Fuller Food Company distributes to consumers coupons which may be presented (on or before a stated expiration date) to grocers for discounts on certain products of Fuller. The grocers are reimbursed when they send the coupons to Fuller. In Fuller's experience, 50% of such coupons are redeemed, and generally one month elapses between the date a grocer receives a coupon from a consumer and the date Fuller receives it. During 2012 Fuller issued two separate series of coupons as follows:

Issued On

 

Total Value

 

Consumer
Expiration Date

 

Amount Disbursed
as of 12/31/12

1/1/12

 

$

500,000

 

06/30/12

 

$

236,000

7/1/12

 

 

720,000

 

12/31/12

 

 

300,000

The only journal entries to date recorded debits to coupon expense and credits to cash of $715,000. The December 31, 2012 balance sheet should include a liability for unredeemed coupons of

7. 

A company offers a cash rebate of $2 on each $6 package of batteries sold during 2012. Historically, 10% of customers mail in the rebate form. During 2012, 6,000,000 packages of batteries are sold, and 210,000 $2 rebates are mailed to customers. What is the rebate expense and liability, respectively, shown on the 2012 financial statements dated December 31?

8. 

CalCount provides its employees two weeks of paid vacation per year. As of December 31, 65 employees have earned two weeks of vacation time to be taken the following year. If the average weekly salary for these employees is $1,140, what is the required journal entry?

9. 

During 2012, Eaton Co. introduced a new product carrying a two-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 3% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2012 and 2013 are as follows:

 

 

Sales

 

Actual Warranty
Expenditures

2012

 

$

800,000

 

$

12,000

2013

 

 

1,000,000

 

 

35,000

 

 

$

1,800,000

 

$

47,000

At December 31, 2013, Eaton should report an estimated warranty liability of

 

10. 

Which of the following does not demonstrate evidence regarding the ability to consummate a refinancing of short-term debt?

11. 

The ability to consummate the refinancing of a short-term obligation may be demon- strated by

12. 

Of the following items, the only one which should not be classified as a current liability is

13. 

On February 10, 2012, after issuance of its financial statements for 2011, House Company entered into a financing agreement with Lebo Bank, allowing House Company to borrow up to $6,000,000 at any time through 2014. Amounts borrowed under the agreement bear interest at 2% above the bank's prime interest rate and mature two years from the date of loan. House Company presently has $2,250,000 of notes payable with First National Bank maturing March 15, 2012. The company intends to borrow $3,750,000 under the agreement with Lebo and liquidate the notes payable to First National. The agreement with Lebo also requires House to maintain a working capital level of $9,000,000 and prohibits the payment of dividends on common stock without prior approval by Lebo Bank. From the above information only, the total short-term debt of House Company as of the December 31, 2012 balance sheet date is

14. 

Ortiz Corporation, a manufacturer of household paints, is preparing annual financial statements at December 31, 2012. Because of a recently proven health hazard in one of its paints, the government has clearly indicated its intention of having Ortiz recall all cans of this paint sold in the last six months. The management of Ortiz estimates that this recall would cost $800,000. What accounting recognition, if any, should be accorded this situation?

15. 

Ermler Corporation has $1,800,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities?

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