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Exam 9: Long-Lived Tangible and Intangible Assets

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Question 31

True/False

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Time value of money is based on the concept that money received today is worth more than money to be received a year from today.

A) True
B) False

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Question 32

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G Co and A Co are both in the biotechnology industry. In 20X3, G Co reported a trade payables turnover of 7.71 and A Co reported a ratio of 3.06. Which of the following is an incorrect reason for the difference in ratios?

A) A Co has a higher average trade payables in comparison to G co.
B) A Co has a lower average trade payables in comparison to G co.
C) A Co is taking longer to pay vendors.
D) G Co has a better payment record in terms of timely payment to vendors.

E) None of the above
F) A) and C)

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Question 33

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The quick ratio is the dollar difference between total assets and total liabilities.

Carly Design Inc. received its annual property tax bill for $8,400 in January. It was paid when due on March 31. Carly Design's year end is Dec 31. The Dec 31 account balances should be

A current liability must be paid out of current earnings.

The following is a partial list of account balances for Van Buskirk Inc. as of December 31, 20X1: $\begin{array} { | l | r | } \hline \text { Trade Payables } & \$ 5,000 \\\hline \text { Trade Receivables } & 6,000 \\\hline \text { Bonds payable (100\% due in 10 years) } & 40,000 \\\hline \text { Mortgage payable (10\% due within one year) } & 10,000 \\\hline \text { Notes payable (due in 6 months) } & 2,000 \\\hline \text { Salaries payable } & 800 \\\hline \text { Sales revenue } & 49,000 \\\hline \text { Current income taxes payable } & 8,000 \\\hline \text { Deferred revenue } & 800 \\\hline\end{array}$ Required: Prepare the liability section of Van Buskirk's classified statement of financial position for December 31, 20X1.

Monmouth Limited has a December 31 year-end. On December 1, 20X6 Monmouth had the following current liabilities listed on its books: $\begin{array} { | l | r | } \hline \text { Bank overdraft } & \$ 18,750 \\\hline \text { Accounts payable } & \$ 122,500 \\\hline \text { CPP, El and income tax payable } & \$ 6,620 \\\hline \text { Unearned revenues } & \$ 12,000 \\\hline\end{array}$ During December 20X6 Monmouth engaged in the following transactions: Required: 1.Prepare all the journal entries required as a result of the above transactions. 2. Prepare the current liabilities section of the balance sheet at December 31, 20X6.

Bison Corp. issues a 5 year 8%, $60,000 note payable on March 1. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second instalment payment will show a:

Midland Company borrowed $5,000 on an 8% (annual rate) interest-bearing note payable on March 1, 20X2. The maturity date of the note (and payment of all interest) is September 1, 20X3. The accounting period ends December 31. Give the entry for each of the dates. Assume simple interest. Round to the nearest dollar.

Match the liabilities with their usual classification on the statement of financial position

The relationship between current assets and current liabilities is

Armadillo Appliances sells new and reconditioned kitchen and laundry appliances. Armadillo sold a reconditioned refrigerator for $1,100 on Oct 25, 20X4, with a one-year warranty covering parts and labour. Warranty expense is estimated at 5% of the selling price, and the appropriate adjusting entry is recorded at Dec 31, 20X4. On January 6, 20X5, the refrigerator is returned for warranty repairs. This cost Armadillo $25 in parts and $20 in labour. When recording the January 6, 20X5 transaction, Armadillo would debit warranty expense with

Use the following financial statement information: Financial Statement Information $\begin{array} { | l | r | r | r | r | } \hline & \text { C Co 20X2 } & \text { C Co 20X1 } & \text { P Co 20X2 } & \text { P Co 20X1 } \\\hline \text { Current Assets } & \$ 4,362 & \$ 6,251 & \$ 6,380 & \$ 5,969 \\\hline \text { Total Assets } & 22,660 & 20,101 & 19,145 & 16,881 \\\hline \text { Current Liabilities } & 7,914 & 4,257 & 8,640 & 7,379 \\\hline \text { Total Liabilities } & 16,259 & 13,165 & 10,742 & 9,607 \\\hline\end{array}$ Calculate the following: $\begin{array} { | l | } \hline \text { a. C Co's 20X2 current ratio } \\\hline \text { b. C Co's 20X1 current ratio } \\\hline \text { c. C Co's 20X2 working capital } \\\hline \text { d. C Co's 20X1 working capital } \\\hline \text { e. P Co's 20X2 current ratio } \\\hline \text { f. P Co's 20X1 current ratio } \\\hline \text { g. P Co's 20X2 working capital } \\\hline \text { h. P Co's 20X1 working capital } \\\hline\end{array}$

Deferred revenue is another term for which of the following?

Big Top Electronics Inc. offers a two-year warranty on its products. The estimated liability is 4% of sales in the year of sale and 6% in the second year. Sales for 20X0 and 20X1 were: $2,500,000 and $2,800,000, respectively. They incurred no warranty costs in 20X0 but in 20X1 they spent $175,000 on repairs related to the warranties from 20X0 and 20X1. -Big Top's warranty expense for 20X0 is

When the current assets of a company such as trade receivables or inventory increase during the year, the increase provides additional cash inflow from operating activities.

In 20X3, Toys 4 U had a trade payables turnover ratio of 6.08; in 20X2, 5.87; and 5.45 in 20X1. Which statement is true about what the ratios indicate?

Interest rates on notes are usually stated as a(n)

A current liability is a debt that can reasonably be expected to be paid

The current portion of long-term debt should be