Question 1

"Current maturities of non-current debt" refers to the amount of interest on notes payable that must be paid in the current year.

Accepted Answer

"Current maturities of non-current debt" refers to the portion of long-term debt that is due to be paid within the next year, not the interest.

Question 2

Account for current liabilities.

Accepted Answer

A current liability is a debt that will be paid (1) from existing current assets or through the creation of other current liabilities, and (2) within one year.An example of a current liability is an operating line of credit that results in bank indebtedness.Current liabilities also include sales taxes, payroll deductions, and employee benefits, all of which the company collects on behalf of third parties.Other examples include property taxes and interest on notes or loans payable, which must be accrued until paid.The portion of non-current debt that is due within the next year must be deducted from the total non-current debt and reported as a current liability.

Question 3

Most notes and bank loans are not interest bearing.

Accepted Answer

Most notes and bank loans are interest-bearing, meaning that the borrower is charged interest on the principal amount borrowed.

Question 4

Identify the requirements for the financial statement presentation and analysis of liabilities.In the income statement, interest expense (finance cost) is reported as "other revenues and expenses." In the statement of financial position, current liabilities are usually reported first, followed by non-current liabilities.

Accepted Answer

The answer of Identify the requirements for the financial statement...

Question 5

If a company's fiscal year is the same as the calendar year used for property tax purposes, there should be no prepaid property tax on its year-end financial statements but there may be a property tax liability.

Accepted Answer

Since the fiscal year and calendar year used for property tax purposes are the same, there is no need for the company to prepay property tax on its year-end financial statements. However, there may still be a property tax liability that needs to be accounted for.

Question 6

Account for instalment notes payable.

Accepted Answer

The answer of Account for instalment notes payable....

Question 7

Account for bonds payable (Appendix 10A).

Accepted Answer

The answer of Account for bonds payable (Appendix 10A)....

Question 8

Notes payable are sometimes used instead of accounts payable.

Accepted Answer

Notes payable are a type of short-term debt that a company promises to pay back with interest, often used for larger purchases or loans from financial institutions. They are different from accounts payable, which represent money owed to suppliers or vendors for goods or services.

Question 9

If any portion of a non-current liability is to be paid in the next year, the entire debt should be classified as a current liability.

Accepted Answer

Only the portion of the non-current liability that is due within the next year should be classified as a current liability, not the entire debt.

Question 10

Payroll liabilities include the employer's share of CPP contributions and EI premiums.

Accepted Answer

Payroll liabilities include various obligations that an employer owes to their employees and to government agencies. These obligations include the employer's portion of Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums.

Question 11

Provisions are liabilities of uncertain timing or amount, along with some uncertainty as to whether the liability will have to be paid.

Accepted Answer

The answer of Provisions are liabilities of uncertain timing or...

Question 12

Even though current and non-current debt must be shown separately on the statement of financial position, it is not necessary to prepare a journal entry to recognize this.

Accepted Answer

It is not necessary to prepare a journal entry to recognize current and non-current debt separately on the statement of financial position. However, when recording the initial issuance of debt or any subsequent debt-related transactions, journal entries must be prepared to reflect the details of the transaction.

Question 13

A contingent liability may materialize in the future because of something that happened in the past.

Accepted Answer

A contingent liability refers to a potential obligation or liability that may arise in the future due to past events. It is not certain whether the liability will actually materialize or not.

Question 14

Interest expense on a bank loan payable is only recorded at maturity.

Accepted Answer

Interest expense on a bank loan payable is generally recorded throughout the loan term, not just at maturity. This is because interest accrues on the loan balance over time, not just at the end of the loan.

Question 15

Property tax payable is classified as a non-current liability because it is related to property, which is a non-current asset.

Accepted Answer

Property tax payable is typically classified as a current liability because it is usually due within one year, regardless of the nature of the asset it is associated with.

Question 16

If drawing on an operating line of credit results in a negative cash balance, a current liability known as bank indebtedness results.

Accepted Answer

When a company draws on their operating line of credit and results in a negative cash balance, the amount owed to the bank is recorded as a current liability known as bank indebtedness.

Question 17

If interest is due at maturity, a $50,000, 4%, 9-month note payable requires an interest payment of $1,500.

Accepted Answer

The interest is calculated as principal x rate x time = $50,000 x 0.04 x (9/12) = $1,500.

Question 18

Notes payable usually require the borrower to pay interest.

Accepted Answer

Notes payable often require the borrower to pay interest, which is generally based on an annual percentage rate (APR). This interest is the cost of borrowing money and is usually paid along with the principal amount borrowed.

Question 19

Amounts available to be drawn in the future from an operating line of credit improve a company's liquidity.

Accepted Answer

An operating line of credit provides a company with the ability to borrow funds as needed, up to a certain amount. This improves the company's liquidity as it ensures that they have access to funds when they need them. The amounts available to be drawn in the future from such a line of credit thus improve the company's liquidity.

Question 20

When a business sells an item and collects Harmonized Sales Tax (HST) on it, a current liability arises.

Accepted Answer

This is because the HST collected is not the business's own money, it belongs to the government and must be remitted to them. Therefore, it is recorded as a current liability until it is remitted to the government.

Quiz 10: Reporting and Analyzing Long-Lived Assets