An accrued expense can be best described as an

amount:

CURRENT LIABILITIES 2 points

paid and currently matched with earnings.
THEORIES paid and not currently matched with earnings.
Piliin mo ang pinakada best na sagot, kaya kang ipaglaban. not paid and not currently matched with earnings.
How will the annual interest or dividend affect total not paid and currently matched with earnings.
liabilities each year? Estimated liabilities are disclosed in financial
2 points statements by:
Interest is a current liability each year until paid.
2 points
Cumulative preferred dividends in arrears are a
footnote to the financial statements.
current liability each year until paid. showing the amount among the liabilities but not
Both interest and cumulative preferred dividends in extending to the liability total.
arrears are current liabilities each year until paid. an appropriation of retained earnings.
Interest and cumulative preferred dividends in appropriately classifying them as regular liabilities
arrears are noncurrent liabilities each year until in the balance sheet.
paid.
Cali Company had a P4,000,000 note payable due
An example of an item which is not liability is:
on March 1, 2001. On January 31, 2001, before the
2 points
issuance of its 2000 financial statements, Cali
dividend payable in stock.
advance from customer on contract. issued long-term bonds payable in the amount of
accrued estimated warranty cost. P5,000,000. Proceeds from the bonds were used to
the portion of long-term debt due within one year. repay the note when it came due. How should Cali
How should cumulative preferred dividends in classify the note in its December 31, 2000 financial
arrears be shown in the balance sheet? statements?
2 points 2 points
footnote current liability with separate disclosure of the note
increase in stockholders’ equity refinancing
increase in current liabilities current liability with no disclosure required
increase in long-term liabilities noncurrent liability with separate disclosure of the
Rent revenue collected one month in advance note refinancing
noncurrent liability with no separate disclosure
should be accounted for as:
required
2 points
Of the following items, the one which should be
revenue in the month collected.
a current liability. classified as a current liability is:
a separate item in stockholders’ equity. 2 points
an accrued liability. an accommodation endorsement.
Which of the following is an accrued liability? a cash dividend declared before the balance sheet
date when the date of record is subsequent to the
2 points
balance sheet date.
cash dividends payable
unfunded past service cost of a pension plan.
wages payable
dividends in arrears on cumulative preferred stock.
rent revenue collected one month in advance
portion of long-term debt payable in current year Which of the following statements is true
concerning contingent liabilities?
2 points probable and the costs can be reasonably
Such liabilities should include obligations of known estimated. This present obligation should be:
existence but of unknown amount.
2 points
If the definite amount is involved, it is not a
accrued and disclosed as a liability.
contingent liability.
neither accrued nor disclosed as a liability.
Such liabilities are generally reported and totaled
accrued as a liability but not disclosed.
with other liabilities to make up the liability section
disclosed but not accrued as a liability.
of most balance sheets.
Such liabilities should include obligations known in
amount but unknown in existence. PROBLEM SOLVING
Present your solutions in good accounting form.
A contingent liability:
The amount of current liabilities on December 31,
2 points
2001 is:
has a most probable value of zero but may require a
payment if a given future event occurs. 3 points
definitely exists as a liability but its amount or due
date is indeterminate.
is commonly associated with operating loss carry-
forwards.
is not disclosed in the financial statements.
An item that is not a contingent liability is:
2 points
premium offer to customers for labels or box tops. P455,000
accommodation endorsement on customer note. P480,000
additional compensation that may be payable on a P450,000
dispute now being arbitrated. P485,000
note receivable discounted. The amount of noncurrent liabilities on December
A loss contingency that should be accrued is: 31, 2001 is:
2 points 2 points
note receivable discounted.
pending lawsuit.
tax in dispute.
estimated claim under a service warranty on new
products sold.
A contingency that need not be disclosed in the
financial statements or in the notes thereto is:
2 points P455,000
pending litigation. P480,000
possibility of strike. P450,000
deficiency tax assessment. P485,000
note receivable discounted. During 1998, Day Company sold 500,000 boxes of
A manufacturer of household appliances has cake mix under a new sales promotional program.
potential costs due to the discovery of a defect in Each box contains one coupon, which entitle the
one of its products. The occurrence of the loss is customer to a baking pan upon remittance of
P4.00. Day pays P5.00 per pan and P0.50 for
handling and shipping. Day estimates that 80% of
the coupons will be redeemed, even though only
300,000 coupons had been processed during 1998.
What amount should Day report as a liability for
unredeemed coupons at December 31, 1998?
5 points
P100,000
P150,000
P300,000
P500,000
On February 5, 2001, an employee filed a
P2,000,000 lawsuit against Steel Company for
damages suffered when one of Steel’s plants
exploded on December 29,2000. Steel’s legal
counsel expects the company will lose the lawsuit
and estimates the loss to be between P500,000 and
P1,000,000. The employee has offered to settle the
lawsuit out of court for P900,000, but Steel will not
agree to the settlement. In its December 31, 2000
balance sheet, what amount should Steel report as
liability from lawsuit?
5 points
P2,000,000
P1,000,000
P900,000
P500,000
Mann Corporation’s liability account balances at
June 30,2001, included a 10% note payable in the
amount of P3,600,000. The note is dated October 1,
2000, and is payable in three equal annual
payments of P1,200,000 plus interest. The first
interest and principal payments were made on
October 1, 2001. In its June 30, 2002 balance
sheet, what amount should Mann report as accrued
interest payable for this note?
5 points
P270,000
P180,000
P90,000
P60,000