Assume that a company has the following situations existing at its II. MATCHING

ID: 2336130 • Letter: A

Question

Assume that a company has the following situations existing at its II. MATCHING ha year-end: a. Refundable deposits received from customers. b. Dividends in arrears on its cumulative preferred stock. c. Unearned interest included in the face amount of a note receivable. d. Estimated property taxes prior to receiving the tax bill. e. Future warranty costs, but the company uses the modified cash basis. f. A declared property dividend. g. Sick pay benefits that accumulate, but do not vest. h. Current portion of a long-term lease obligation that comes due next year i. Current portion of a serial bond payable being paid from a sinking fund. j. Short-term debt that is being refinanced on a long-term basis. k. Derivative financial instruments that represent fair-value obligations. Required: Use "yes," "no," or "optional" to indicate whether each situation should or should not be classified as a current liability or if accrual is optional. (Deduct 2 points for each incorrect answer)

Explanation / Answer

Answer:

Yes

Refundable deposits received from customers

Dividend in arrears on its cumulative preferred stock

Unearned interest included in the face amount of a note receivable

Yes

Estimated property taxes prior to receiving the tax bill

Future warranty costs, but the company uses the modified cash basis.

Yes

A declared property dividend.

Optional

Sick pay benefits that accumulate, but do not vest.

Yes

Current portion of a long-term lease obligation that comes due next year.

Current portion of a serial bond payable being paid from a sinking fund.

Short-term debt that is being refinanced on a long-term basis

Yes

Derivative financial instruments which represent fair-value obligations

Yes