Exam (elaborations)
ACCOUNTING EXAM 3 QUESTIONS WITH VERIFIED ANSWERS
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- Accounting
- Institution
- Accounting
ACCOUNTING EXAM 3 QUESTIONS WITH VERIFIED ANSWERS
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ACCOUNTING EXAM 3 QUESTIONSWITH VERIFIED ANSWERS
Which of the following is not an estimated liability? - Answer-Allowance for bad debts
Recording estimated warranty expense in the year the related products are sold best
follows which accounting principle? - Answer-Expense recognition (matching)
Accounts payable turnover for Big Blue Inc., increased from 10 to 12 during 2014.
Which of the following statements best describes what this means? - Answer-The
company paid its accounts payable more slowly in 2014, signaling a weaker liquidity
position.
Packard Co. was originated to sell a single product that carries a 45-day warranty
against defects. Engineering estimates indicate that 2% of the units sold will prove
defective and require an average repair cost of $45 per unit. During Packard's first
month of operations, total sales were 900 units; by the end of the month, 5 defective
units had been repaired. The liability for product warranties at month-end should be -
Answer-$585
[900 x 0.02 x $45 = warranty expense of $810; repaired $45 x 5 = $225; year end
liability = $585 ($810-$225)]
A contingent liability should be recorded in the accounts - Answer-If the amount can be
reasonably estimated / If the related future event will probably occur
An unsecured bond is a - Answer-Debenture bond
The Discount on Bonds Payable account - Answer-is a contra account to Bonds
Payable
The discount on a bond payable becomes - Answer-Additional interest expense over
the life of the bonds
A bond that matures in installments is called a - Answer-Serial bond
The carrying value of Bonds Payable equals - Answer-Bonds Payable - Discount on
Bonds Payable
Dart Corporation's leverage ratio increased from 2.5 in 2013 to 3.0 in 2014. Without
looking at the financial statements, which statement best describes what may have
occurred? - Answer-The company incurred new debt financing in 2014, but it may or
may not have been more profitable.
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