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Accounting for Liabilities

unable to audit accounts receivable; contingent liabilities

Below are two independent situations: A. Grinner and Greeter, CPAs, were engaged to perform an audit of the financial statements of Happy, Inc. Happy's management would not allow Grinner and Greeter to confirm any of the accounts receivable. All other auditing procedures were performed as considered necessary by Grinner and Gr

sources of evidence/information for the search for unrecorded liabilities

When performing procedures in a search of unrecorded liabilities, auditors can utilize various sources of evidence/information (e.g. documents, files, management and clerical personnel). Required: list at least five, but not more than seven, sources of evidence/information for the search for unrecorded liabilities.(Do not wr

current liabilities, bonds, depreciation methods

1. What are the criteria for classifying an item as a current liability? What are some examples of current liabilities? Why is it important to classify a portion of long-term debt on a yearly basis as a current liability? What is the implication of misclassifying a liability as current or long-term? How can misclassification of

Apple and Philips: Expenses, Assets and Liabilities

Distinguish between an expense (expired cost) and an asset. Distinguish between current and long-term assets. Distinguish between current and long-term liabilities. Review Apple's balance sheet and provide two examples of each of the above categories. Discuss retained earnings and how income or loss and dividends

Estimated Warranty Liability

During 2010, Eaton Co. introduced a new product carrying a 2-year warranty against defects. The estimated warranty costs related to dollar sales are 2% within 12 months following sale and 4% in the second 12 months following sale. Sales and actual warranty expenditures for the years ended December 31, 2010 and 2011 are as foll

Liability for Premiums

Mott Co. includes one coupon in each bag of dog food it sells. In return for eight coupons, customers receive a leash. The leashes cost Mott $2.00 each. Mott estimates that 40% of the coupons will be redeemed. Data for 2010 and 2011 are as follows. 2010 2011 Bags

Rebate Expense and Liability

A company offers a cash rebate of $1 on each $4 package of light bulbs sold during 2010. Historically, 10% of customers mail in the rebate form. During 2010, 4,000,000 packages of light bulbs were sold, and $140,000 in $1 rebates are mailed to customers. What is the rebate expense and liability, respectively, on the 2010 fina

Solving Governmental Accounting Problems

7) When supplies ordered by a governmental unit are received at an actual price which is more than the estimated price on the purchase order, the Encumbrance Control account is: A. debited for the estimated price on the purchase order B. credited for the actual price on the purchase order C. credited for the or

Reporting & Analyzing Liabilities; Stockholders Equity

C 10 - Reporting & Analyzing Liabilities   1. Does your company use short-term or long-term financing to acquire a majority of funds it needs? Please explain without going into too much detail about your company. 2. What are the advantages of using long-term debt versus short-term debt? Discuss the impact base on their ava

Total assets, liabilities, and stockholders' equity

Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity. Assets Liabilities Stockholders 'Equity (1) Declaring a cash dividend (2) Paying the cash dividend declared in (1) (3) Declaring a stock divi

Taxation: Sec 351, assumed liabilities, distributive share

1. Devin contributes land (adjusted basis of $30,000; fair market value of $100,000) to Thompson, Inc., in exchange for all of its stock. The land is encumbered by a mortgage of $27,000 which Thompson, Inc. assumes. The transaction qualifies for non-recognition treatment under code section 351. Compute Devin's adjusted basis for

Wilde Corporation owns 30% of the outstanding stock of Bernie, Inc. Bernie recorded net income of $10M and paid dividends of $3M in 2005. For each of the following ratios, state the effect (higher, lower or no effect) that the use of the equity method would have on Wilde's financial ratios compared to the use of the cost method in 2005. Explain and discuss your answers. Gross margin. Total asset turnover. Cash flow from operations to current liabilities. Debt to equity .

Wilde Corporation owns 30% of the outstanding stock of Bernie, Inc. Bernie recorded net income of $10M and paid dividends of $3M in 2005. For each of the following ratios, state the effect (higher, lower or no effect) that the use of the equity method would have on Wilde's financial ratios compared to the use of the cost method

Audit: Unrecorded Liabilities for Scott Corporation

You were in the final stages of your audit of the financial statements of Scott Corporation for the year ended December 31, 20X0, when you were consulted by the corporation's president, who believes there is no point to your examining the 20X1 voucher register and testing data in support of 20X0 entries. He stated that (1)

Fundamental Accounting: 10 multiple choice questions

Question 1 1. Sales taxes payable is a/an: a)estimated liability. b)contingent liability. c)current liability for retailers. d)business expense. Question 2 1. Phildell Phoenix is paid on a monthly basis. For the month of January of the current year, he earned a total of $8,288. FICA tax for social secu

Principles of Accounting

Tom Perry recently completed the first month of his landscaping business and has contacted you for help in preparing financial statements. While he understands that liabilities are the debts his business owes, he is a little confused about the difference between current and long-term liabilities. His business currently owes the

Current Liability Transactions

Use account titles for the transactions: Cash, Accounts Payable, Notes Payable, Interest Payable, Unearned Ticket Revenue, Ticket Revenue, Supplies Expense, Discount, and Interest Expense. Scenario 1: On April 1, 2009 Williams Company borrowed $100,000 from National Bank. The note is a 10%, nine month note. Interest accrues q

Contingency, and how does it differ from a liability

a. What is a contingency, and how does it differ from a liability? b. Under what conditions should a contingency be reported as if it were a liability? c. What are some examples of contingencies that a company might face? Explain.

Personal Financial Problems for William's Creditors

Hardin, Sutton, and Williams has operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, Williams has undergone personal financial problems, and is insolvent. To satisfy William's creditors, the partnership has deiced to liquidate. The

This posting addresses environmental liability treatment.

Wilson Company is involved in a litigation suit concerning the clean-up of old underground oil storage tanks on property it sold to a housing development company five years ago. The attorneys for Wilson Company cannot give a best estimate for the probable liability; however, the attorneys state that the liability to Wilson Comp

Addressing Gift Cards as Liabilities

A gift card is a liability correct and an unearned income correct. What happens if the gift card is never used and how long will it stay on the books as a liability? What happens to the money that the organization has for unused gift cards?

Baldwin Corporation's Total Liabilities

1. Digby has a leverage of 1.81 This means that: (Assume leverage is calculated as Assets/Equity) 2. On July 31st, the Baldwin Corporation's balance sheet reported: Total Assets of $87.248 million Total Common Stock of $2.540 million Cash of $4.020 million Retained Earnings of $20.016 million. What were the Baldwi