MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
Woodcrest, Inc. borrowed $50,000 from a local bank and signed a promissory note. What entry should
Woodcrest record?
A. Debit Cash, $50,000; Credit Notes Receivable, $50,000.
B. Debit Notes Receivable, $50,000; Credit Cash, $50,000.
C. Debit Cash, $50,000; Credit Notes Payable, $50,000.
D. Debit Notes Payable, $50,000; Credit Cash, $50,000. - (answer) C
We record interest expense in the period in which we pay it, rather than in the period we incur it
A. True
B. False - (answer) B
On November 1, 2018, Knomark, Inc. signed a $100,000, 6%, six-month note payable with the amount
borrowed plus accrued interest due six months later on May 1, 2019. Knomark should report interest
payable at December 31, 2018, in the amount of
A. $0.
B. $1,000
C. $2,000
D. $3,000 - (answer) B
On November 1, 2018, Boiler Bakery signed a $200,000,
6%, six-month note payable with the amount borrowed plus accrued interest due six months later on
May 1, 2019. Boiler Bakery records the appropriate adjusting entry for the note on December 31, 2018.
What amount of cash will be needed to pay back the note payable plus any accrued interest on May 1,
2019?
A. $200,000.
B. $202,000
C. $204,000
D. $206,000 - (answer) D
A contingency is best described as a(n)
,MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
a. currentliability.
b. probable liability.
c. potential liability.
d. estimatedliability. - (answer) C
If management can estimate the amount of loss that will occur due to litigation against the company,
and the likelihood of the loss is reasonably possible, a contingent liability should be
A. Disclosed, but not reported as a liability
B. Disclosed and reported as a liability
C. Neither disclosed nor reported as a liability
D. Reported as a liability, but not disclosed - (answer) A
Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal
counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of
$100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins
report this litigation?
A. As a liability for $100,000 with disclosure of the range
B. As a liability for $150,000 with disclosure of the range
C. As a liability for $200,000 with disclosure of the range
D. As a disclosure only. No liability is reported - (answer) A
Away Travel filed suit against West Coast Travel seeking damages for copyright violations. West Coast
Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an
estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered
equally likely. How should West Coast Travel report this litigation?
A. As a liability for $100,000 with disclosure of the range
B. As a liability for $150,000 with disclosure of the range
C. As a liability for $200,000 with disclosure of the range
D. As a disclosure only. No liability is reported - (answer) D
,MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
If management can estimate the amount of loss that will occur due to litigation against the company,
and the likelihood of the loss is probable, a contingent liability should be
A. Disclosed, but not reported as a liability
B. Disclosed and reported as a liability
C. Neither disclosed nor reported as a liability
D. Reported as a liability, but not disclosed - (answer) B
Footnote disclosure is required for material potential losses when the loss is at least reasonably
possible:
A. Only if the amount is known.
B. Only if the amount is known or reasonably estimable.
C. Unless the amount is not reasonably estimable.
D. Even if the amount is not reasonably estimable. - (answer) D
Ford estimates engine warranty expense in the year a car is sold. This best follows which of the following
accounting principles?
A. historical cost
B. full disclosure
C. consistency
D. matching - (answer) D
The balance in the Warranty Liability account is always equal to Warranty Expense
A. True
B. False - (answer) B
Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers'
goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45
have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty expense
for the year?
A. $0
, MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
B. $16,000
C. $7,000
D. $9,000 - (answer) B
Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers'
goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45
have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty liability at
the end of the year?
A. $0
B. $16,000
C. $7,000
D. $9,000 - (answer) C
We record gain contingencies when the gain is probable and the amount is reasonably estimable
A. True
B. False - (answer) B
The mixture of debt and equity securities is generally the same for most companies.
A. True
B. False - (answer) B
Which of the following is not a true statement?
A. Companies that are believed to have high bankruptcy risk generally receive low credit ratings and
must pay a higher interest rate for borrowing
B. As a company's level of debt increases, the risk of bankruptcy increases
C. Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both
tax-deductible
D. The mixture of liabilities and stockholders' equity a business uses is called its capital structure -
(answer) C
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
Woodcrest, Inc. borrowed $50,000 from a local bank and signed a promissory note. What entry should
Woodcrest record?
A. Debit Cash, $50,000; Credit Notes Receivable, $50,000.
B. Debit Notes Receivable, $50,000; Credit Cash, $50,000.
C. Debit Cash, $50,000; Credit Notes Payable, $50,000.
D. Debit Notes Payable, $50,000; Credit Cash, $50,000. - (answer) C
We record interest expense in the period in which we pay it, rather than in the period we incur it
A. True
B. False - (answer) B
On November 1, 2018, Knomark, Inc. signed a $100,000, 6%, six-month note payable with the amount
borrowed plus accrued interest due six months later on May 1, 2019. Knomark should report interest
payable at December 31, 2018, in the amount of
A. $0.
B. $1,000
C. $2,000
D. $3,000 - (answer) B
On November 1, 2018, Boiler Bakery signed a $200,000,
6%, six-month note payable with the amount borrowed plus accrued interest due six months later on
May 1, 2019. Boiler Bakery records the appropriate adjusting entry for the note on December 31, 2018.
What amount of cash will be needed to pay back the note payable plus any accrued interest on May 1,
2019?
A. $200,000.
B. $202,000
C. $204,000
D. $206,000 - (answer) D
A contingency is best described as a(n)
,MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
a. currentliability.
b. probable liability.
c. potential liability.
d. estimatedliability. - (answer) C
If management can estimate the amount of loss that will occur due to litigation against the company,
and the likelihood of the loss is reasonably possible, a contingent liability should be
A. Disclosed, but not reported as a liability
B. Disclosed and reported as a liability
C. Neither disclosed nor reported as a liability
D. Reported as a liability, but not disclosed - (answer) A
Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal
counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of
$100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins
report this litigation?
A. As a liability for $100,000 with disclosure of the range
B. As a liability for $150,000 with disclosure of the range
C. As a liability for $200,000 with disclosure of the range
D. As a disclosure only. No liability is reported - (answer) A
Away Travel filed suit against West Coast Travel seeking damages for copyright violations. West Coast
Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an
estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered
equally likely. How should West Coast Travel report this litigation?
A. As a liability for $100,000 with disclosure of the range
B. As a liability for $150,000 with disclosure of the range
C. As a liability for $200,000 with disclosure of the range
D. As a disclosure only. No liability is reported - (answer) D
,MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
If management can estimate the amount of loss that will occur due to litigation against the company,
and the likelihood of the loss is probable, a contingent liability should be
A. Disclosed, but not reported as a liability
B. Disclosed and reported as a liability
C. Neither disclosed nor reported as a liability
D. Reported as a liability, but not disclosed - (answer) B
Footnote disclosure is required for material potential losses when the loss is at least reasonably
possible:
A. Only if the amount is known.
B. Only if the amount is known or reasonably estimable.
C. Unless the amount is not reasonably estimable.
D. Even if the amount is not reasonably estimable. - (answer) D
Ford estimates engine warranty expense in the year a car is sold. This best follows which of the following
accounting principles?
A. historical cost
B. full disclosure
C. consistency
D. matching - (answer) D
The balance in the Warranty Liability account is always equal to Warranty Expense
A. True
B. False - (answer) B
Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers'
goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45
have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty expense
for the year?
A. $0
, MGMT 200 FINAL EXAM (PURDUE UNIVERSITY) NEWEST 2024 FINAL EXAM, PRACTICE EXAM AND STUDY
GUIDE 300 QUESTIONS AND CORRECT DETAILED ANSWERS
B. $16,000
C. $7,000
D. $9,000 - (answer) B
Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers'
goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45
have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty liability at
the end of the year?
A. $0
B. $16,000
C. $7,000
D. $9,000 - (answer) C
We record gain contingencies when the gain is probable and the amount is reasonably estimable
A. True
B. False - (answer) B
The mixture of debt and equity securities is generally the same for most companies.
A. True
B. False - (answer) B
Which of the following is not a true statement?
A. Companies that are believed to have high bankruptcy risk generally receive low credit ratings and
must pay a higher interest rate for borrowing
B. As a company's level of debt increases, the risk of bankruptcy increases
C. Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both
tax-deductible
D. The mixture of liabilities and stockholders' equity a business uses is called its capital structure -
(answer) C
