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Chapter 5 Liabilities
Answers to Multiple Choice Questions
1.D | 2.D | 3.A | 4.A | 5.C | 6.C |
7.D | 8.D | elysia9.D | 10.D | 11.C* | 12.A**diba |
* 4901036 0.04-5000000 0.039=1041 4901036 0.04+(4901036+1041) 0.04=392124 ** 4901039+1041+[(4901036+1041) 0.04-5000000 0.039]=4903160 |
| | | one by one | | |
Answers to Discussion Questions
1. a. Receiving goods and rvices prior to making payment
b. Receiving payment prior to delivering goods and rvices
2. Short-term notes payable may be issued to purcha merchandi or other asts or to satisfy an account payable created earlier.
3. To match revenues and expens properly, the liability to cover product warranties should be recorded in the period during which the sale of the product is made.
4. When the defective product is repaired, the repair costs would be recorded by debiting Provisions-Warranties and crediting Cash, Supplies, or another appropriate account.
5. Liabilities are debts or obligations arising from past transactions or events, and which require ttlement at a future date. Liabilities and owners’ equity are the two primary means by which a business finances ownership of its asts and its business operations.
The feature which most distinguishes liabilities from equity is that liabilities mature and must be paid at some future date, whereas owners’ equity does not. In the event of liquidation of the business, the claims of creditors (liabilities) have priority over the claims of owners (equity). Also, interest paid to creditors is deductible in the determination of taxable income, whereas dividends paid to stockholders are not deductible.
6. In the event of liquidation of a business, the claims of creditors (liabilities) have priority over the claims of owners (equity). The relative priorities of individual creditors, however, vary greatly. Secured creditors have top priority with respect to proceeds stemming from the sale of the specific asts that have been pledged as collateral curing their loans. The priority of uncured creditors is determined by legal statutes and indenture contracts.
7. Current liabilities are tho maturing within one year or the company’s operating cycle (whichever is longer) and expected to be paid from current asts. Liabilities classified as long-term include obligations maturing more than one year in the future, and also shorter term obligations that will be refinanced or paid from noncurrent asts.
A 10-year bond issue would be classified as a current liability once its due date comes within 12 months of the maturity date, assuming that the issue will be paid from current asts.
A note payable maturing in 30 days could be classified as a long-term liability if (a) mana
gement had both the intent and the ability to refinance this obligation on a long-term basis, or (b) the liability will be paid from noncurrent asts.
8. Employers are required by law to pay the following payroll taxes and insurance premiums: Social Security and Medicare taxes, unemployment taxes, and workers’ compensation insurance premiums. In addition, many employers include the following as part of the “compensation package” provided to employees: group health insurance premiums, contributions to employee pension plans, and postretirement benefits (such as health insurance). Both mandated and discretionary costs are included as part of total payroll cost in addition to the wages and salaries earned by employees.
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9. From an investor’s perspective, a bond reprents a ries of future cash receipts that are fixed in amount by the contract rate of interest on the bonds and by the bonds’ maturity value. As market interest rates ri, a ries of future receipts that are fixed in dollar amount become less attractive in relation to other investment opportunities, and the price of the bond falls. As interest rates fall, any ries of fixed cash receipts become more attractive in relation to other opportunities, and bond prices ri.
10. Bonds with contract rates of interest above current market interest rates should be trading at prices above their face values. Bond prices vary inverly with market interest rates.
11. Estimated liabilities have two basic characteristics: (1) the liability is known to exist at the balance sheet date and (2) the preci dollar amount cannot be determined until a later date. Examples include the liability to honor warranties on products sold and an accrual of a liability relating to a loss contingency.
12. A loss contingency is a possible loss (or expen) stemming from past events that will be resolved as to existence and amount by some future event. Examples include pending litigation, the allowance for uncollectible accounts, and the risk that the political climate in foreign countries has impaired the value of asts in tho locations.
Loss contingencies are accrued (recorded) if it is both (1) probable that a loss has been incurred, and (2) the amount of loss can be estimated reasonably. Even if the condition
s are not met, loss contingencies should be disclod in financial statements if it is reasonably possible that a material loss has been incurred.
disabled是什么意思Answers to Problems
Problem 5-1
Apr. | 30 | Accounts Payable | 100,000 | |
| | Short-Term Notes Payable | | 混血儿英语100,000 |
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May | 30 | Short-Term Notes Payable | 100,000 | |
| | Financial Expens-Interest Expens | 500 | |
| | Cash | | 100,500 |
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| | | | |
Problem 5-2
