Podcast
Questions and Answers
What amount should Lulzbot.com accrue on December 31 for estimated warranty costs?
What amount should Lulzbot.com accrue on December 31 for estimated warranty costs?
- €12,000
- €6,000
- €3,000
- €9,000 (correct)
When should the estimated cost of honoring warranty contracts be recognized as an expense?
When should the estimated cost of honoring warranty contracts be recognized as an expense?
- Only if repairs are expected within one year
- In the period in which the product was sold (correct)
- When the product is brought in for repairs
- At the end of the warranty period
Current maturities of long-term debt can be properly classified during the statement of financial position preparation by which means?
Current maturities of long-term debt can be properly classified during the statement of financial position preparation by which means?
- Only if an adjusting entry is made
- No adjusting entry is required (correct)
- With optional reporting on the statement
- Considering them as non-current liabilities
Which principle is the accounting for warranty costs based upon?
Which principle is the accounting for warranty costs based upon?
How are warranty expenses reported on the income statement?
How are warranty expenses reported on the income statement?
What is the average repair cost per unit in the warranty for Lulzbot.com?
What is the average repair cost per unit in the warranty for Lulzbot.com?
What percentage of the units sold by Lulzbot.com is expected to be defective?
What percentage of the units sold by Lulzbot.com is expected to be defective?
If a company recognizes warranty expense when the product is sold, what principle are they following?
If a company recognizes warranty expense when the product is sold, what principle are they following?
What entry will be made by Maple Street Bookstore to show the remittance of $1,500 in sales taxes collected during April?
What entry will be made by Maple Street Bookstore to show the remittance of $1,500 in sales taxes collected during April?
If sales taxes collected are remitted monthly, which account does Maple Street Bookstore debit when making the payment?
If sales taxes collected are remitted monthly, which account does Maple Street Bookstore debit when making the payment?
What total amount was reported for sales revenue in one of the entries involving cash?
What total amount was reported for sales revenue in one of the entries involving cash?
What is the nature of the account 'Sales Taxes Payable' in accounting?
What is the nature of the account 'Sales Taxes Payable' in accounting?
Which type of current liability is payable upon the issuance of a note?
Which type of current liability is payable upon the issuance of a note?
Which of the following entries correctly records the collection of sales taxes?
Which of the following entries correctly records the collection of sales taxes?
Current liabilities are generally expected to be paid within what time frame?
Current liabilities are generally expected to be paid within what time frame?
When recording the issuance of an interest-bearing note, what does the entry credit Notes Payable for?
When recording the issuance of an interest-bearing note, what does the entry credit Notes Payable for?
When Rhode Company does not ring up sales taxes separately, how is the total revenue determined?
When Rhode Company does not ring up sales taxes separately, how is the total revenue determined?
In accounting entries involving sales tax, which account is generally credited when sales tax is collected?
In accounting entries involving sales tax, which account is generally credited when sales tax is collected?
The amount received upon issuing an interest-bearing note is generally what in relation to the note's face value?
The amount received upon issuing an interest-bearing note is generally what in relation to the note's face value?
What financial impact does recording Sales Tax Expense have on the income statement?
What financial impact does recording Sales Tax Expense have on the income statement?
What form does a note payable take?
What form does a note payable take?
What does the entry to record the proceeds upon issuing an interest-bearing note typically involve?
What does the entry to record the proceeds upon issuing an interest-bearing note typically involve?
If a company issues a note for €600,000 at 8% interest, what is the entry made to record the issuance?
If a company issues a note for €600,000 at 8% interest, what is the entry made to record the issuance?
What distinguishes current liabilities from other liabilities?
What distinguishes current liabilities from other liabilities?
What amount will be reported as Warranty Liability on Lulzbot.com's statement of financial position on December 31, 2020?
What amount will be reported as Warranty Liability on Lulzbot.com's statement of financial position on December 31, 2020?
Current liabilities generally appear in which order on the statement of financial position?
Current liabilities generally appear in which order on the statement of financial position?
What is the maximum time frame a current liability can be expected to be paid?
What is the maximum time frame a current liability can be expected to be paid?
Which statement regarding current liabilities is incorrect?
Which statement regarding current liabilities is incorrect?
How is warranty cost calculated in the case of Lulzbot.com?
How is warranty cost calculated in the case of Lulzbot.com?
Which of the following is included in current liabilities?
Which of the following is included in current liabilities?
What is the formula for calculating the current ratio?
What is the formula for calculating the current ratio?
Monkee's Company's working capital is calculated as:
Monkee's Company's working capital is calculated as:
If a company has liabilities exceeding its assets, which of the following might be true?
If a company has liabilities exceeding its assets, which of the following might be true?
How much warranty expense should Landfall Navigation report for 2020?
How much warranty expense should Landfall Navigation report for 2020?
What is the average repair cost per unit mentioned for warranty purposes?
What is the average repair cost per unit mentioned for warranty purposes?
What is the warranty liability Landfall Navigation should report on December 31, 2020?
What is the warranty liability Landfall Navigation should report on December 31, 2020?
If Wang Company honored 60 warranty contracts at a total cost of HK$3,600, what will be the estimated liability for future contracts?
If Wang Company honored 60 warranty contracts at a total cost of HK$3,600, what will be the estimated liability for future contracts?
Which of the following represents a common error in calculating working capital?
Which of the following represents a common error in calculating working capital?
In what scenario would a company report no warranty obligations by the end of the year?
In what scenario would a company report no warranty obligations by the end of the year?
What aspect does the current ratio evaluate for a company?
What aspect does the current ratio evaluate for a company?
Study Notes
Current Liabilities
- Notes Payable is a written promissory note that a company issues to a lender.
- Interest-Bearing Note is a note that pays interest to the lender.
- Face Value is the principal amount of a note.
- Maturity Value is the principal amount plus the accrued interest on a note.
- Current Liabilities are debts that a company expects to pay within one year or the operating cycle, whichever is longer.
- Operating Cycle is the time it takes to purchase inventory, sell it, and collect the cash from the customer.
- Sales Taxes Payable is the amount of sales taxes that a company has collected from customers but has not yet remitted to the government.
- Working Capital is the difference between current assets and current liabilities. A lower working capital may lead to liquidity issues (not enough cash to cover day-to-day expenses).
- Current Ratio is a measure of a company's ability to meet its short-term obligations. A higher current ratio signifies better liquidity. The calculation for the current ratio is: Current Assets / Current Liabilities.
- Warranty Expense is an expense that companies recognize to cover the cost of repairs or replacements under a warranty.
- Warranty Liability is a liability that a company recognizes to represent its estimated future warranty costs. The expense recognition principle requires that companies recognize warranty expense in the period in which the product was sold.
- Current Maturities of Long-Term Debt are portions of long-term debt that become due within one year and are classified as current liabilities.
- Prepaid Expenses are not current liabilities because they represent assets, as the company has already paid for them. They are eventually expensed as the goods or services are received.
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Description
This quiz covers key concepts related to current liabilities, including notes payable, interest-bearing notes, and the current ratio. Test your understanding of terms like working capital and sales taxes payable. Explore how these elements impact a company's financial health and liquidity.
