Purdue MGMT 200 Final Exam Questions and Answers Rated A+

Purdue MGMT 200 Final Exam Questions and Answers Rated A+ Woodcrest, Inc. borrowed $50,000 from a local bank and signed a promissory note. What entry should Woodcrest record? Debit Cash, $50,000; Credit Notes Payable, $50,000. We record interest expense in the period in which we pay it, rather than in the period we incur it False. Interest expense is recorded in the period incurred, not in the period in which we pay it. 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 [($100,000 × 6%) × 2/12] = $1,000 On September 1, 2018, ATI Corporation signed a $100,000, 9%, six‐month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. ATI should report interest payable at December 31, 2018, in the amount of: [($100,000 × 9%) × 4/12] = $3,000 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? $200,000 + [$200,000 × 6% × 6/12] = $206,000 A contingency is best described as a(n) potential liability 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 must be probable Disclosed, but not reported as a liability 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? As a liability for $100,000 with disclosure of the range 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? As a disclosure only. No liability is reported 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 Disclosed and reported as a liability Footnote disclosure is required for material potential losses when the loss is at least reasonably possible: Even if the amount is not reasonably estimable Ford estimates engine warranty expense in the year a car is sold. This best follows which of the following accounting principles? matching The balance in the Warranty Liability account is always equal to Warranty Expense False. The Warranty Liability account is increased by warranty expense, but it is also reduc 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? 4,000 goals × 2% cost to repair 800/goals X 200/goals = $16,000 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? $7,000 We record gain contingencies when the gain is probable a