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Accounting Chapter 8

End-of-Chapter Quiz Questions

QuestionAnswer
True or False. Product warranties are an estimated liability. True
True or False. Vacation pay is an estimated liability. True
True or False. Income taxes is an estimated liability. True
True or False. Allowance for bad debts is an estimated liability. False
Recording estimated warranty expense in the current year best follows what accounting principle? Matching
Crank the Volume grants a 120-day warranty on all stereos. Historically, approx. 1% of all sales prove to be defective. Sales in March are $450,000. In March, $3,800 of defective units are returned for replacement. What entry must CV make to rec. WarExpe? Debit Warranty Expense and credit Estimated Warranty Payable, $4,500 ($450,000 x .01 = $4,500)
A Co. sells a single product that carries a 45-day warranty against defects. 4% of the units sold will prove defective and require repair cost of $25 per unit. During the Co.'s 1st month of oper., total sales = 900 units, 15 were defective. Liability is? $525 [900 x .04 x $25 = warranty expense of $900; repaired $25 x 15 = $375; year-end liability = $525 ($900 - $375)]
True or False. A contingent liability should be recorded in the accounts if the amount can be reasonably estimated. True
True or False. A contingent liability should be recorded in the accounts if the amount is due in cash within one year. False
True or False. A contingent liability should be recorded in the accounts if the related future event will probably occur. True
An unsecured bond is a: Debenture Bond
The Discount on Bonds Payable account: Is a contra account to Bonds Payable
The discount on a bond payable becomes: Additional Interest expense over the life of the bonds
A bond that matures in installments is called a: Serial Bond
The carrying value of Bonds Payable equals: Bonds Payable - Discount on Bonds Payable
A corporation issues bonds that pay interest each May 1 and Nov. 1. The corporation's Dec. 31 adjusting entry may include a: credit to Discount on Bonds Payable
Created by: 1482116593