Chapter 5  Liabilities
Answers to Multiple Choice Questions
1.D
2.D
3.A
4.A
5.C
6.C
7.D
8.D
9.D
10.D
11.C*
12.A**
* 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
Answers to Discussion Questions
1.  a.    Receiving goods and services prior to making payment
b.    Receiving payment prior to delivering goods and services
2.    Short-term notes payable may be issued to purchase merchandise or other assets or to satisfy an account payable created earlier.
3.    To match revenues and expenses 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 settlement at a future date. Liabilities and owners’ equity are the two primary means by which a business finances ownership of its assets 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 assets that have been pledged as collateral securing their loans. The priority of unsecured creditors is determined by legal statutes and indenture contracts.                   
7.    Current liabilities are those maturing within one year or the company’s operating cycle (whichever is longer) and expected to be paid from current assets. 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 assets.   
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 assets.           
A note payable maturing in 30 days could be classified as a long-term liability if (a) manage
ment 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 assets.           
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.                   
9.    From an investor’s perspective, a bond represents a series 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 rise, a series 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 series of fixed cash receipts become more attractive in relation to other opportunities, and bond prices rise.                           
10.    Bonds with contract rates of interest above current market interest rates should be trading at prices above their face values. Bond prices vary inversely 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 precise 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 expense) 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 assets in those 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 these conditions are not met, loss contingencies should be disclosed in financial statements if it is reasonabl
y possible that a material loss has been incurred.                           
Answers to Problemsdeductible
Problem 5-1
Apr.
30
Accounts Payable
100,000
    Short-Term Notes Payable
100,000
May
30
Short-Term Notes Payable
100,000
Financial Expenses-Interest Expenses
500
    Cash
100,500
Problem 5-2

版权声明：本站内容均来自互联网，仅供演示用，请勿用于商业和其他非法用途。如果侵犯了您的权益请与我们联系QQ:729038198，我们将在24小时内删除。