Question 1

Browning Company's salaried employees are paid biweekly.Information relating to salaries for the calendar year 2014 is as follows:  At December 31, 2014, what amount should Browning report for accrued salaries payable?
A)$126,000
B)$120,000
C)$91,000
D)$35,000

Accepted Answer

The answer of Browning Company's salaried employees are paid biweekly.Information...

Question 2

Krypton Foods distributes coupons to consumers which may be presented, on or before a stated expiry date, to grocery stores for discounts on certain Krypton products.The stores are reimbursed when they send the coupons in to Krypton.In Krypton's experience, only about 50% of these coupons are redeemed.During 2014, Krypton issued two separate series of coupons as follows:  Krypton's only journal entries for 2014 recorded debits to coupon expense, and credits to cash of $268,000.Their December 31, 2014 statement of financial position should include a liability for unredeemed coupons of
A)$0.
B)$30,000.
C)$62,000.
D)$180,000.

Accepted Answer

The answer of Krypton Foods distributes coupons to consumers which...

Question 3

Included in Harrison Inc.'s account balances at December 31, 2014, were the following:  Harrison's December 31, 2014 financial statements were to be issued on March 31, 2015.On January 15, 2015, the entire $600,000 balance of the 6% note was refinanced by issuance of a long-term note to be repaid in 2015.In addition, on March 10, 2015, Harrison made arrangements to refinance the 4% note on a long-term basis.Under IFRS, on the December 31, 2014 statement of financial position, the amount of the notes payable that Harrison should classify as current liabilities is
A)$0.
B)$100,000.
C)$250,000.
D)$350,000.

Accepted Answer

The answer of Included in Harrison Inc.'s account balances at...

Question 4

Ye Olde Shoppe operates in a province with a 6% PST.The store must also collect 5% GST on all sales.For the month of May, Ye Olde Shoppe sold $90,000 worth of goods to customers, 60% of which were cash sales and the balance being on account.Based on the above information, what is the total debit to Accounts Receivable for the month of May?
A)$59,940
B)$39,960
C)$37,800
D)$36,000

Accepted Answer

The answer of Ye Olde Shoppe operates in a province...

Question 5

Which of the following is generally associated with current liabilities classified as accounts payable?

Accepted Answer

The answer of Which of the following is generally associated...

Question 6

At December 31, 2014, Manganese Corp.'s records show the following balances, all of which are normal: PST Payable, $625; GST Payable, $600; GST Recoverable, $488.In January 2015, Manganese pays the Federal Government the net amount owing regarding GST owing from December.The journal entry to record this payment will include a
A)debit to GST Payable of $112.
B)credit to Cash of $600.
C)credit to GST Payable of $600.
D)credit to GST Recoverable of $488.

Accepted Answer

The answer of At December 31, 2014, Manganese Corp.'s records...

Question 7

Helium Corp.provides the following information for 2014 and 2015:  To one decimal, Helium's days payable outstanding for 2015 is
A)43.6 days.
B)46.2 days.
C)47.2 days.
D)48.7 days.

Accepted Answer

The answer of Helium Corp.provides the following information for 2014...

Question 8

The total payroll of Carbon Company for the month of October was $240,000, all subject to CPP deductions of 4.95% and EI deductions of 1.83%.As well, $60,000 in federal income taxes and $6,000 of union dues were withheld.The employer matches the employee deductions and contributes 1.4 times the employee EI deductions.What amount should Carbon record as employer payroll tax expense for October?
A)$16,272.00
B)$18,028.80
C)$24,028.80
D)$78,028.80

Accepted Answer

Total deductions for CPP and EI:
CPP: $240,000 x 4.95% = $11,880.00
EI: $240,000 x 1.83% = $4,392.00

Total deductions for federal income tax and union dues:
Federal income tax: $60,000
Union dues: $6,000

Total deductions: $82,272.00

Employer contribution for EI deductions: $4,392.00 x 1.4 = $6,148.80

Total employer payroll tax expense:
$11,880.00 + $6,148.80 = $18,028.80

Therefore, the answer is B.

Question 9

Potassium Corp.uses the revenue approach to account for warranties.During 2014, the company sold $500,000 worth of products, all of which carried a two year warranty (included in the price).It was estimated that 2% of the selling price represented the warranty portion, and that 60% of this related to 2014, and 40% to 2015.Assuming that Potassium incurred costs of $3,700 to service the warranties in 2015, what is the net warranty revenue (revenue minus warranty costs)for 2015?
A)$300
B)$1,300
C)$3,700
D)$4,000

Accepted Answer

The answer of Potassium Corp.uses the revenue approach to account...

Question 10

Presented below is information available for Radon Corp.:  Total current liabilities are $100,000.To two decimals, Radon's acid-test ratio is
A)5.60.
B)5.30.
C)2.80.
D).36.

Accepted Answer

The answer of Presented below is information available for Radon...

Question 11

On September 1, 2014, Coffee Ltd.issued a $1,800,000, 12% note to Humungous Bank, payable in three equal annual principal payments of $600,000.On this date, the bank's prime rate was 11%.The first payment for interest and principal was made on September 1, 2015.At December 31, 2015, Coffee should record accrued interest payable of
A)$72,000.
B)$66,000.
C)$48,000.
D)$44,000.

Accepted Answer

The interest for the remaining principal of $1,200,000 (after the first payment of $600,000) at 12% for 4 months (September to December) is $48,000.

Question 12

In 2014, Hydrogen Corp.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:  Hydrogen uses the expense approach to account for warranties.What is the estimated warranty liability at the end of 2015?
A)$73,500
B)$43,500
C)$28,500
D)$12,000

Accepted Answer

The answer of In 2014, Hydrogen Corp.began selling a new...

Question 13

Lee Kim Inc.'s most recent statement of financial position includes  To two decimals, Lee Kim Inc.has a current ratio of
A).27.
B).48.
C)1.63.
D)2.20.

Accepted Answer

The answer of Lee Kim Inc.'s most recent statement of...

Question 14

On Dec 12, 2014, Ivory Coast, CGA, received $5,000 from a customer as an advance payment for accounting work to be done.The payment was credited to Accounting Revenue. Thirty percent of the work was performed in December 2014, with the rest to be done in January 2015, at which time the customer will be billed.The required adjusting entry at December 31, 2014 (year end)is
A)Dr Unearned Revenue $1,500, Cr Accounting Revenue $1,500.
B)Dr Accounting Revenue $1,500, Cr Unearned Revenue $1,500.
C)Dr Accounting Revenue $3,500, Cr Unearned Revenue $3,500.
D)Dr Unearned Revenue $3,500, Cr Accounting Revenue $3,500.

Accepted Answer

The initial entry incorrectly credited the entire $5,000 to Accounting Revenue. Since only 30% of the work was completed by December 31, 2014, $1,500 (30% of $5,000) should be recognized as revenue. The remaining $3,500 should be adjusted as unearned revenue, requiring a debit to Accounting Revenue and a credit to Unearned Revenue for $3,500.

Question 15

Jordan Corp.operates in Ontario, selling a variety of goods.For most of these goods, Jordan must charge 13% HST, for some they only have to charge 5% HST; while a very few are tax exempt.During June of this year, the company reported sales of $200,000, on which 70% were charged 13% HST, 25% were charged only 5% HST, and the rest were tax exempt sales. The total amount of HST collected in June was
A)$10,000.
B)$18,200.
C)$20,700.
D)$26,000.
Non-Financial and Current Liabilities 13- 25

Accepted Answer

To calculate the total HST collected:  - 70% of $200,000 is $140,000, charged at 13% HST: $140,000 * 0.13 = $18,200.  - 25% of $200,000 is $50,000, charged at 5% HST: $50,000 * 0.05 = $2,500.  - The remaining 5% of $200,000 is tax exempt, so no HST is collected.  Total HST collected = $18,200 + $2,500 = $20,700.

Question 16

Aluminum Ltd.has made a total of $23,250 in instalments for corporate income tax for calendar 2014, all of which have been debited to Current Income Tax Expense.At year end, Dec 31, 2014, the accountant has calculated that the corporation's actual tax liability is only $21,500.What is the correct adjusting entry to reflect this fact?
A)Dr Current Income Tax Expense $1,750, Cr Income Taxes Payable $1,750
B)Dr Income Taxes Payable, $1,750, Cr Current Income Tax Expense $1,750
C)Dr Income Taxes Receivable $1,750, Cr Current Income Tax Expense $1,750
D)Dr Current Income Tax Expense $21,500, Cr Income Taxes Payable $21,500

Accepted Answer

The company overpaid its taxes by $1,750 ($23,250 - $21,500). The correct entry is to debit Income Taxes Receivable to reflect the overpayment and credit Current Income Tax Expense to reduce the expense to the actual liability.

Question 17

At January 1, 2014, Neon Corp.owned a machine that had cost $100,000.The accumulated depreciation to date was $60,000, estimated residual value was $6,000, and fair value was $160,000.On January 4, 2014, this machine suffered major damage due to Argon Corp.'s actions and was written off as worthless.In October 2014, a court awarded damages of $160,000 against Argon in favour of Neon.At December 31, 2014, the final outcome of this case was awaiting appeal and was, therefore, uncertain.However, in the opinion of Neon's attorney, Argon's appeal will be denied.At December 31, 2014, what amount should Neon accrue for this gain contingency?
A)$160,000
B)$130,000
C)$100,000
D)$0

Accepted Answer

Gain contingencies are not recognized in financial statements until they are realized or realizable. Since the outcome of the appeal is uncertain, Neon should not accrue any amount for the gain contingency.

Question 18

Zircon Ltd., a GST registrant, buys $4,500 worth of Office Supplies for their own use.The purchase is subject to 8% PST and 5% GST.What amount will be debited to the Office Supplies account as a result of this transaction?
A)$4,500
B)$4,725
C)$4,860
D)$5,085

Accepted Answer

The amount of PST and GST paid on the purchase of Office Supplies is calculated as follows:

PST = 8% of $4,500 = $360
GST = 5% of ($4,500 + $360) = $235.80

Therefore, the total amount paid for the purchase including PST and GST is $4,500 + $360 + $235.80 = $4,860. Thus, the amount debited to the Office Supplies account will also be $4,860.

Question 19

Platinum Corp.uses the expense approach to account for warranties.They sell a used car for $30,000 on Oct 25, 2014, with a one year warranty covering parts and labour.Warranty expense is estimated at 2% of the selling price, and the appropriate adjusting entry is recorded at Dec 31, 2014.On March 12, 2015, the car is returned for warranty repairs.This cost Platinum $200 in parts and $120 in labour.When recording the March 12, 2015 transaction, Platinum would debit Warranty Expense with
A)Zero.
B)$120.
C)$200.
D)$320.

Accepted Answer

The expense approach records the estimated warranty expense at the time of sale. Actual costs incurred later are charged against the warranty liability, not the expense account.

Question 20

Asbestos Corp.is being sued for illness caused to local residents as a result of negligence on the company's part in permitting the local residents to be exposed to highly toxic chemicals. Asbestos's lawyer states that it is likely the corporation will lose the suit and be found liable for a judgement which may cost Asbestos anywhere from $300,000 to $1,500,000.However, the lawyer states that the most likely cost is $900,000.As a result of the above facts, using ASPE, Non-Financial and Current Liabilities 13- 21 Asbestos should accrue
A)a loss contingency of $300,000 and disclose an additional contingency of up to
$1,200,000.
B)a loss contingency of $900,000 and disclose an additional contingency of up to
$600,000.
C)a loss contingency of $900,000 but not disclose any additional contingency.
D)no loss contingency but disclose a contingency of $300,000 to $1,500,000.

Accepted Answer

Under ASPE, when a loss is likely and can be reasonably estimated, the most likely amount should be accrued. In this case, $900,000 is the most likely amount, and the range of $300,000 to $1,500,000 should be disclosed as an additional contingency.

Quiz 2: Intermediate Accounting Volume 2

Browning Company's salaried employees are paid biweekly.Information relating to salaries for the calendar year 2014 is as follows: At December 31, 2014, what amount should Browning report for accrued salaries payable?

Which of the following is generally associated with current liabilities classified as accounts payable?

Helium Corp.provides the following information for 2014 and 2015: To one decimal, Helium's days payable outstanding for 2015 is

Presented below is information available for Radon Corp.: Total current liabilities are $100,000.To two decimals, Radon's acid-test ratio is

Lee Kim Inc.'s most recent statement of financial position includes To two decimals, Lee Kim Inc.has a current ratio of

Zircon Ltd., a GST registrant, buys $4,500 worth of Office Supplies for their own use.The purchase is subject to 8% PST and 5% GST.What amount will be debited to the Office Supplies account as a result of this transaction?