liability ef a certain amount gation of an uncertsin amount that can be reasonsb

Question

liability ef a certain amount gation of an uncertsin amount that can be reasonsbby estimaned. 1S. As estimated liability R) Is a known obli C) is a liability that D) Can be the result of a lawsuit E) Is sot recorded ustil the amount is known for certain. Learning Objocios: P I6. Estimated liabilities ccemonly arine from A) Warranties B) Vacation benefits C) Income taxes. D) Employee benefits E) All ef the above A mpany sold S12,000 worth armpolnes with an extended warranty. Itestimates that 2% of these sales will result in warranty work. The company shoukd A) Consider the B) Recogniae warranty expeimse at the time the warranty work is performed warranty expense a remote liability since the rate is only 2%. C) Recognine D) Consider warranty expense and liability in the year of the the warranty expense a contingent liabil E) Recognize warranty liability when the company purchases the trampolines Learning Obiestive: P4 y's sales for the current period are SI current period's entry to record the warranty expense is Warranty Expense 7,400 7,400 B) Warranty Expense 7,400 Estimated Warranty Liability 7.400 c) Estimated Warranty Lability 7,400 Estimated Warranty Expense 7,400 D) Warranty Liability 7,400 7,400 E) No entry is recorded until the items are returned for warranty repairs Learning Obiective: Previous Final Exam AS1000, soday 12% note was issued on November l 2005. What is the amount of accrued interest on December 31,2 A) $300 B) SI,200 19. C) $150 D) $200 Leaming Obiective: Previous Final Exam A $10,00, 90-tay 12% note was issued on November 1, 2005. What is the amount of interest expense recorded in 2006 A) $100 B) $300 C) $200 D) $1,200 20.

Explanation / Answer

Q15. Answer is B. Is a known obligation with uncertain amount can be reasonably estimated. Q16. Answer is E. All of the above. Q17. Answer is C. Recognize the warranty expense and liability in the year of sale. Q18. Answer is B. Warranty expense Dr.    $ 7400                  Estimated Warranty liability                                  $ 7400 Q19. Answer is D. $ 200. Explanation: Interest accrued (Nov1-Dec31 = 60 days): 10,000*12%*60/360 = $ 200 Q20. Answer is A. $ 100. Explanation: Period fall in 2016 (90-60 days) =30 days Interest expense of 2016: 10,000*12%*30/360= $ 100

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