ACG 2071 EXAM 3 FINAL PAPER
COMPLETE QUESTIONS WITH CORRECT
ANSWERS ALREADY PASSED
●● Current liabilities related to employee compensation may include:
Answer: - Payroll deductions
- Compensated absences
- Bonuses
●● Employees also pay ________________ payroll taxes
Answer: ADDITIONAL
●● Compensated Absences:
Answer: paid absences from employment such as vacation, illness, and
holidays
●● Accrue a liability if all the following conditions exist:
Answer: - The employer's obligation is attributable to employees'
services already rendered
- The obligation relates to rights that vest or accumulate vest or
accumulate
- Payment of the compensation is probable
,- The amount can be reasonably estimated
●● Bonuses
Answer: Payments to certain or all employees in addition to their regular
salaries or wages
●● Bonuses paid are an
Answer: operating expense
●● Unpaid Bonuses should be reported as a(n)?
Answer: current liability
●● Current maturities of long-term debt
Answer: Portion of bonds, mortgage notes, and other long-term
indebtedness that matures within the next fiscal year.
●● Exclude debts maturing currently if they are to be:
Answer: 1. Retired by assets accumulated that have not been shown as
current assets,
2. Refinanced, or retired from the proceeds of a new debt issue, or
3. Converted into capital stock.
●● ON DEMAND "Callable" liabilities are
,Answer: CURRENT
●● Practice Exercise: On December 31, 2020, McDaniel Company had
$1,200,000 of short-term debt in the form of notes payable due February
2, 2021. On January 21, 2021, the company issued 25,000 shares of its
common stock for $38 per share, receiving $950,000 proceeds after
brokerage fees and other costs of issuance. On February 2, 2021, the
proceeds from the stock sale, supplemented by an additional $250,000
cash, are used to liquidate the $1,200,000 debt. The December 31, 2020
balance sheet is issued on February 23, 2021.
(Show how the $1,200,000 of short-term debt should be presented on the
December 31, 2020 balance sheet, including note disclosure.)
Answer: Hattie McDaniel Company
Partial Balance Sheet
December 31, 2017
Current Liabilities:
Notes Payable 250,000
Long-term Debt:
Notes Payable 950,000
Solution:
, Note: Short-term debt refinanced. As of December 31, 2017, the
company had notes payable totaling $1,200,000 due on February 2,
2018. These notes were refinanced on their due date to the extent of
$950,000 received from the issuance of common stock on January 21,
2018. The balance of $250,000 was liquidated using current assets.
●● Contingencies
Answer: "An existing condition, situation, or set of circumstances
involving uncertainty as to possible gain (gain contingency) or loss (loss
contingency) to an enterprise that will ultimately be resolved when one
or more future events occur or fail to occur."
●● Litigation/Claims/Assessments considerations:
Answer: - Time period in which the action occurred
- Probability of an unfavorable outcome
- Ability to reasonably estimate the loss
●● Guaranty and Warranty Costs
Answer: Promises made by the seller to the buyer to make good on a
deficiency of quantity, quality or product performance
●● Assurance-type warranty, included in the
Answer: regular sale
COMPLETE QUESTIONS WITH CORRECT
ANSWERS ALREADY PASSED
●● Current liabilities related to employee compensation may include:
Answer: - Payroll deductions
- Compensated absences
- Bonuses
●● Employees also pay ________________ payroll taxes
Answer: ADDITIONAL
●● Compensated Absences:
Answer: paid absences from employment such as vacation, illness, and
holidays
●● Accrue a liability if all the following conditions exist:
Answer: - The employer's obligation is attributable to employees'
services already rendered
- The obligation relates to rights that vest or accumulate vest or
accumulate
- Payment of the compensation is probable
,- The amount can be reasonably estimated
●● Bonuses
Answer: Payments to certain or all employees in addition to their regular
salaries or wages
●● Bonuses paid are an
Answer: operating expense
●● Unpaid Bonuses should be reported as a(n)?
Answer: current liability
●● Current maturities of long-term debt
Answer: Portion of bonds, mortgage notes, and other long-term
indebtedness that matures within the next fiscal year.
●● Exclude debts maturing currently if they are to be:
Answer: 1. Retired by assets accumulated that have not been shown as
current assets,
2. Refinanced, or retired from the proceeds of a new debt issue, or
3. Converted into capital stock.
●● ON DEMAND "Callable" liabilities are
,Answer: CURRENT
●● Practice Exercise: On December 31, 2020, McDaniel Company had
$1,200,000 of short-term debt in the form of notes payable due February
2, 2021. On January 21, 2021, the company issued 25,000 shares of its
common stock for $38 per share, receiving $950,000 proceeds after
brokerage fees and other costs of issuance. On February 2, 2021, the
proceeds from the stock sale, supplemented by an additional $250,000
cash, are used to liquidate the $1,200,000 debt. The December 31, 2020
balance sheet is issued on February 23, 2021.
(Show how the $1,200,000 of short-term debt should be presented on the
December 31, 2020 balance sheet, including note disclosure.)
Answer: Hattie McDaniel Company
Partial Balance Sheet
December 31, 2017
Current Liabilities:
Notes Payable 250,000
Long-term Debt:
Notes Payable 950,000
Solution:
, Note: Short-term debt refinanced. As of December 31, 2017, the
company had notes payable totaling $1,200,000 due on February 2,
2018. These notes were refinanced on their due date to the extent of
$950,000 received from the issuance of common stock on January 21,
2018. The balance of $250,000 was liquidated using current assets.
●● Contingencies
Answer: "An existing condition, situation, or set of circumstances
involving uncertainty as to possible gain (gain contingency) or loss (loss
contingency) to an enterprise that will ultimately be resolved when one
or more future events occur or fail to occur."
●● Litigation/Claims/Assessments considerations:
Answer: - Time period in which the action occurred
- Probability of an unfavorable outcome
- Ability to reasonably estimate the loss
●● Guaranty and Warranty Costs
Answer: Promises made by the seller to the buyer to make good on a
deficiency of quantity, quality or product performance
●● Assurance-type warranty, included in the
Answer: regular sale
