Reference no: EM133197871

QUESTION 1

1. An XYZ customer alleges that the company's equipment has a defect that resulted in serious injury to the customer. XYZ believes that the client has an 85% chance of winning the case, and that if the client wins the case, there is a range of losses between $300,000 and $1,000,000 in which any number is equally likely. Under GAAP, XYZ must accrue a liability in the amount of

a)$0
b)$300,000
c)$1,000,000
d)$650,000

QUESTION 2

1. How is the issue price of a bond calculated?

a)The present value of the interest annuity payments is computed and the present value of the principal is added using the effective interest rate for both present value computations.

b)The present value of the interest annuity payments is computed and the present value of the principal is subtracted using the effective interest rate for both present value computations.

c)The future value of the interest annuity payments is computed and the future value of the principal is added using the effective interest rate for both future value computations.

d)The present value of the principal is computed and the present value of the interest annuity payments are subtracted using the effective interest rate for both present value computations.

QUESTION 3

1. ABC paid interest totaling $785,000 during 2019, and increased the interest payable account by $125,000. What was the interest expense reported in the 2019 income statement?

a)$660,000
b)$555,000
c)$785,000
d)$910,000

QUESTION 4

1. The taxes that an employer has to pay in connection with payroll often represent liabilities to employees.

a) True
b)False

QUESTION 5

1. Unasserted assessment of penalty that is reasonably possible that will be asserted and in which case a loss is probable, should be recorded as a liability.

a)True
b)False

QUESTION 6

1. Identify and define the three classifications prescribed by GAAP with respect to contingency accounting to identify the range of possibilities that a confirmation event occurs for contingent liabilities. Describe the accounting action to be taken for each term

QUESTION 7

1. On July 31, ABC issued several 9-month notes payable for a total amount of $50,000,000. Interest is paid at maturity.

Request:

Determine the interest expense that should accrue in the year-end adjusting entry under each of the following independent assumptions: (be sure to show all of your computations to receive full credit and label each answer clearly)

1. Rate 12% New Year's Eve on February 28
2. Rate 14% New Year's Eve on November 30
3. Rate 10% End of the Year to December 31

QUESTION 8

1. On January 1, 2022, ABC issued bonds with a nominal rate of 14%, dated January 1, 2022, and principal of $1,000,000.
The bonds expire on January 1, 2024.

The effective interest rate is 12%.
Interest is paid quarterly on April 1, July 1, October 1, and January 1 of each year.
The company closes its books every December 31.

Request:

1. Present the bond's amortization schedule using the effective interest method.
2. Prepare the entry to record the bond issue by ABC on January 1, 2022.
3. Prepare the entry to record interest on April 1, July 1, October 1, and December 31, 2022.