Chapter 13 Homework, Unidad 18 . cras-
cres-cris-cros-crus, Chapter 9
In its Year 2 financial statements, Cris co. reported interest expense of 85,000
in its income statement and cash paid for interest of 68,000 in its cash flow
statement. There was no prepaid interest or interest capitalization either at the
beginning or end of Year 2. Accrued interest at December 31, Year 1, was
15,000. What amount should Cris report as accrued interest payable in its
December 31, Year 2 balance sheet? - correct answer ✔32,000
Beginning balance 15,000
accrued in Y2 85,000
Total 100,000
less interest paid (68,000)
ending balance Y2 32,000
On September 1, Year 1, Brak co. borrowed on a 1,350,000 note payable
from Federal Bank. The note bears interest at 12% and is payable in three
equal annual principle payments of 450,000. On this date, the bank's prime
rate was 11%. The first annual payment for interest and principal was made of
September 1, Year 2. At December 31, Year 2, what amount should Brak
report as accrued interest payable? - correct answer ✔36,000
Carrying Amount, 9/1 Y1 - 1,350,000
Less principal payment, 9/1 Y2 - (450,000)
Carrying Amount, 9/1 Y2 - 900,000
, 12/31 Y2 interest payable = 900,000 * 12% *4/12 = 36,000
At December 31, Year 1, Taos Co. estimates that its employees have earned
vacation pay of 100,000. Employees will receive their vacation pay in Year 2.
Should Taos accrue a liability at December 31, Year 1, if the rights to this
compensation accumulated over time or if the rights are vested? - correct
answer ✔Yes and Yes
Employee's compensation for future absences (mostly vacation) should be
accrued if:
-services have already been rendered,
-the obligation relates to vested or accumulated rights,
-the amount can be reasonably estimated, and
-payment is probable
Oak Co. offers a three-year warranty on its products. Oak previously
estimated warranty costs to be 2% of sales. Due to a technological advance in
production at the beginning of Year 3, Oak now believes 1% of sales to be a
better estimate of warranty costs. Warranty costs of 80,000 and 96,000 were
reported in Year 1 and Year 2, respectively. Sales for Year 3 were 5,000,000.
What amount should be disclosed in Oak's Year 3 financial statements as
warranty expense? - correct answer ✔50,000
warranty expense is calculated as a percentage of sales. Any change in the
estimate of percentage is recorded prospectively, from the current year
forward. Thus it is 5,000,000 * 1% = 50,000
During Year 1, Haft Co. became involved in a tax dispute with the IRS. At
December 31, Year 1, Haft's tax advisor believed that an unfavorable outcome
was probable. A reasonable estimate of additional taxes was 200,000 but
could be as much as 300,000. After the Year 1 financial statements were
issued, Haft received and accepted an IRS settlement offer of 275,000. What
