Question :
101. An estimated liability:
A. Is an unknown liability of a certain amount.
B. Is : 1225196
101. An estimated liability:
A. Is an unknown liability of a certain amount.
B. Is a known obligation of an uncertain amount that can be reasonably estimated.
C. Is a liability that may occur if a future event occurs.
D. Can be the result of a lawsuit.
E. Is not recorded until the amount is known for certain.
102. Estimated liabilities commonly arise from:
A. Warranties.
B. Vacation benefits.
C. Income taxes.
D. Employee benefits.
E. All of these.
103. Employees earn vacation pay at the rate of one day per month. During July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense to be recorded for the month of July?
A. $25
B. $100
C. $250
D. $2,500
E. $25,000
104. Employee vacation benefits:
A. Are estimated liabilities.
B. Are contingent liabilities.
C. Are recorded as an expense when the employee takes a vacation.
D. Are recorded as an expense when the employee retires.
E. Increase net income.
105. A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:
A. Consider the warranty expense a remote liability since the rate is only 2%.
B. Recognize warranty expense at the time the warranty work is performed.
C. Recognize warranty expense and liability in the year of the sale.
D. Consider the warranty expense a contingent liability.
E. Recognize warranty liability when the company purchases the trampolines.
106. The deferred income tax liability:
A. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules.
B. Is a contingent liability.
C. Can result in a deferred income tax asset.
D. Is never recorded.
E. Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.
107. A company estimates that warranty expense will be 4% of sales. The company’s sales for the current period are $185,000. The current period’s entry to record the warranty expense is:
A. Debit Warranty Expense $7,400; credit Sales $7,400.
B. Debit Warranty Expense $7,400; credit Estimated Warranty Liability $7,400.
C. Debit Estimated Warranty Liability $7,400; credit Warranty Expense $7,400.
D. Debit Estimated Warranty Liability $7,400; credit Cash $7,400.
E. No entry is recorded until the items are returned for warranty repairs.
108. A company sells computers at a selling price of $1,800 each. Each computer has a 2 year warranty that covers replacement of defective parts. It is estimated that 2% of all computers sold will be returned under the warranty at an average cost of $150 each. During November, the company sold 30,000 computers, and 400 computers were serviced under the warranty at a total cost of $55,000. The balance in the Estimated Warranty Liability account at November 1 was $29,000. What is the company’s warranty expense for the month of November?
A. $26,000
B. $45,000
C. $55,000
D. $60,000
E. $90,000
109. Maryland Company offers a bonus plan to its employees equal to 3% of net income. Maryland’s net income is expected to be $960,000. The amount of the employee bonus expense is estimated to be
A. $27,961
B. $28,800
C. $29,000
D. $29,691
E. $30,000
110. A payroll register includes:
A. Pay period dates.
B. Hours worked.
C. Gross pay and net pay.
D. Deductions.
E. All of these.
