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Exam 9: Reporting and Analysing Liabilities

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Question 1

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Match the descriptions with their terms: -A measure of an entity's immediate short-term liquidity, also called the acid-test

A) Non-current liability
B) Present value
C) Warranty
D) Issue price
E) Current liability
F) Borrowing costs
G) Contract interest rate
H) Mortgage
I) Quick ratio
J) Provision

K) B) and F)
L) A) and E)

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Question 2

Multiple Choice

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A borrower must allocate mortgage repayments between:

A) interest expense and interest revenue.
B) interest expense and loan liability.
C) interest revenue and loan liability.
D) loan liability and shareholders' equity.

E) A) and B)
F) A) and D)

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Question 3

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To the extent that long-term debt is repayable within the same period as current liabilities, it should be classified as a current liability.

Match the descriptions with their terms: -An obligation that is not classified as a current liability

Which of the following is not an example of a provision?

Match (by letter) each of the following as being : -Interest expense

On 1 October, Simon's Solar Service borrows $150,000 from Statewide Bank on a 3 month, 4% note. -What accrual entry must Simon's Solar Service make on 31 December before financial statements are prepared?

Warranties are not recognised as liabilities by manufacturers as the amount of any future claims is too uncertain and/or unlikely.

Each time a borrower makes a mortgage repayment, the borrower must allocate the amount between unearned revenue and revenue.

Complete the following statements: -The ________ value of a note payable is the amount of ____________ due at maturity date.

Beach Ltd's payroll for June 2019 was $20,000. The pay week ended on 30 June and was paid on the 1 July. Payroll deductions from amounts paid during June were as follows: Required: (a) State the current liabilities relating to Beach Ltd's payroll at 30 June 2019. (b) Prepare the journal entry to record the payroll for the pay week ended 30 June.

Complete the following statements: -Liabilities are classified on the statement of financial position as being _______________ liabilities or ______________ liabilities.

If a company redeems notes and debentures, it adds debt to its statement of financial position.

Sydney Symphony sells 200 season tickets for $20,000 that includes a five-concert season. The amount of unearned ticket revenue after the third concert is $12,000.

Non-current liabilities are obligations of a business that it expects to pay after one year.

Match (by letter) each of the following as being : -5 year debentures payable

Shareholder control is diminished by the issue of debt financing.

The following information relates to Rangitata Ltd as at 30 June 2019. The quick ratio is:

The NZA Bank agrees to issue $180,000 of 3-month notes payable to Campbell Ltd on 1 March 2019. The notes are interest-bearing at the rate of 10%. Prepare the journal entries to record: (a) the notes on issue date (b) the repayment of the notes including the interest, on due date.

Provisions are liabilities for which the amount of the future sacrifice is uncertain.