Question 1

Which of the following is not a characteristic of a liability?

There is a probable future sacrifice of resources.

There is a fixed payment amount and payment date.

There is little discretion to avoid the obligation.

The event giving rise to the liability has already occurred.

Question 2
Melman Microscopes Inc. offers a two-year warranty against failure of its products. The estimated liability is 1.5% in the year of sale and 3% in the second year. Sales and actual warranty expense for 2016 and 2017 were:

The warranty liability on the December 31, 2017 balance sheet was

$0.

$28,000.

$138,000.

$175,500.

Question 4

A company borrows $100,000 from a bank, which will be repaid by monthly payments of $1,000 over the next 10 years. Each $1,000 payment consists partly of a repayment of principal, and partly interest. Over time, the amount of interest included in each monthly payment will

decrease.

stay the same.

increase.

cannot tell, as the interest rate is not known.

Question 5
Jems& Jewels Inc. offers a two-year warranty against failure of its products. The estimated liability is 4% of sales in the year of sale and 6% in the second year. Sales for 2016 and 2017 were: $2,500,000 and $2,800,000, respectively. They incurred no warranty costs in 2016 but in 2017 they spent $175,000 on repairs related to the warranties from 2016 and 2017. The warranty expense for 2016 was

$80,000.

$100,000.

$150,000.

$250,000.

Question 6
Which of the following statements about accounts payable is not true?

They are usually due within 30 to 60 days.

They normally carry implicit interest charges.

There may be a penalty for late payment.

They are typically used to finance inventory purchases.

Question 7
A company borrows $12,000 from a bank on a short-term note payable. The note pays 8% interest per year (simple interest). Payments of $600 are made at the end of each month to the bank. What would be the interest expense component of the second month's $600 payment?

$80.00

$76.53

$76.00

none of the above

Question 8
Jems& Jewels Inc. offers a two-year warranty against failure of its products. The estimated liability is 4% of sales in the year of sale and 6% in the second year. Sales for 2016 and 2017 were: $2,500,000 and $2,800,000, respectively. They incurred no warranty costs in 2016 but in 2017 they spent $175,000 on repairs related to the warranties from 2016 and 2017. The warranty liability as at the end of the 2017 year was

$75,000.

$280,000.

$355,000.

$530,000

Question 9

When the board declares dividends, the correct journal will be:

Dividends Expense
Dividends Payable

Dividend Declared
Cash

Dividends Declared
Dividends Payable

Dividends Receivable
Dividends Revenue