Principles of Accounting Volume 1
19th Edition
ISBN: 9781947172685
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 12, Problem 1PB
Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year).
A. A business depreciates a building with a book value of $12,000, using straight-line
B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60.
C. An employee earns $1,000 in pay and the employer withholds $46 for federal income tax.
D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
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Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year).
A business depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years.
An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60.
An employee earns $1,000 in pay and the employer withholds $46 for federal income tax.
A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.
. Discuss the appropriate treatment in the financial statements of each of the following.
a. Gain on sale of investment securities.
b. A profit-sharing bonus to employees computed as a percentage of net income.
c. Additional depreciation on factory machinery because of an error in computing depreciation for the previous year.
d. Rent received from subletting a portion of the office space.
e. A patent infringement suit, brought 2 years ago against the company by another company, was settled this year by a cash payment of $725,000.
f. A reduction in the Allowance for Doubtful Accounts balance because the account appears to be considerably in excess of the probable loss from uncollectible receivables.
The following items pertain to possible provisions:
A company self-insures for floods. That is, it pays no insurance but is liable to replace assets lost through flood damage. No losses have been incurred this year, but there have been $195,000 of losses in most other years, and the company is concerned that there might well be $485,000 of losses next year, evening out the pattern.
A company offers a three-year guarantee over parts and labour for products sold to ensure that parts work as expected. There were no payments this year, and only 5% of products sold this year are expected to need repairs in the next year. The cost of this work would be in the range of $125,000.
A company has been sued by a customer for $1,130,000. The customer slipped on ice coming out of the store and claims the store did not put salt down or clear the stairs properly. The company’s lawyer has indicated that there is a 10% chance that the company will lose the lawsuit based on past history. The company,…
Chapter 12 Solutions
Principles of Accounting Volume 1
Ch. 12 - Which of the following is not considered a current...Ch. 12 - A company regularly purchases materials from a...Ch. 12 - The following is selected financial data from...Ch. 12 - A ski company takes out a $400,000 loan from a...Ch. 12 - Nido Co. has a standing agreement with a supplier...Ch. 12 - A client pays cash in advance for a magazine...Ch. 12 - Lime Co. incurs a $4,000 note with equal principal...Ch. 12 - Which of the following best describes a contingent...Ch. 12 - Blake Department Store sells television sets with...Ch. 12 - What accounts are used to record a contingent...
Ch. 12 - Which of the following best describes a contingent...Ch. 12 - Which of the following accounts are used when a...Ch. 12 - Which of the following is not a characteristic of...Ch. 12 - Sunlight Growers borrows $250,000 from a bank at a...Ch. 12 - Marathon Peanuts converts a $130,000 account...Ch. 12 - An employee earns $8,000 in the first pay period....Ch. 12 - Which of the following is considered an employer...Ch. 12 - Employees at Rayon Enterprises earn one day a...Ch. 12 - An employee and employer cost-share health...Ch. 12 - Why is Accounts Payable classified as a current...Ch. 12 - On which financial statement are current...Ch. 12 - What is the difference between a noncurrent...Ch. 12 - How is the sales tax rate usually determined? Does...Ch. 12 - If Bergen Air Systems takes out a $100,000 loan,...Ch. 12 - What amount is payable to a state tax board if the...Ch. 12 - What specific accounts are recognized when a...Ch. 12 - What is a contingent liability?Ch. 12 - What are the two FASB required conditions for a...Ch. 12 - If a bankruptcy is deemed likely to occur and is...Ch. 12 - Name the four contingent liability treatments.Ch. 12 - A companys sales for January are $250,000. If the...Ch. 12 - What is a key difference between a short-term note...Ch. 12 - What business circumstance could bring about a...Ch. 12 - What business circumstance could produce a...Ch. 12 - Jain Enterprises honors a short-term note payable....Ch. 12 - What are examples of involuntary deductions...Ch. 12 - What are the tax rates for FICA Social Security...Ch. 12 - What are FUTA and SUTA taxes? Is there any...Ch. 12 - Use Figure 12.15 as a reference to answer the...Ch. 12 - Campus Flights takes out a bank loan in the amount...Ch. 12 - Consider the following accounts and determine if...Ch. 12 - Lamplight Plus sells lamps to consumers. The...Ch. 12 - Review the following transactions and prepare any...Ch. 12 - Review the following transactions and prepare any...Ch. 12 - Elegant Electronics sells a cellular phone on...Ch. 12 - Homeland Plus specializes in home goods and...Ch. 12 - Bhakti Games is a chain of board game stores....Ch. 12 - Following is the unadjusted trial balance for Sun...Ch. 12 - Barkers Baked Goods purchases dog treats from a...Ch. 12 - Use information from EA10. Compute the interest...Ch. 12 - Scrimiger Paints wants to upgrade its machinery...Ch. 12 - Following are payroll deductions for Mars Co....Ch. 12 - Toren Inc. employs one person to run its solar...Ch. 12 - In EA14, you prepared the journal entries for the...Ch. 12 - An employee and employer cost-share pension plan...Ch. 12 - Everglades Consultants takes out a loan in the...Ch. 12 - Match each of the following accounts with the...Ch. 12 - Pianos Unlimited sells pianos to customers. The...Ch. 12 - Review the following transactions and prepare any...Ch. 12 - Review the following transactions and prepare any...Ch. 12 - Monster Drinks sells twenty-four cases of...Ch. 12 - McMasters Inc. specializes in BBQ accessories. In...Ch. 12 - Following is the unadjusted trial balance for Pens...Ch. 12 - Airplanes Unlimited purchases airplane parts from...Ch. 12 - Use information from EB9. Compute the interest...Ch. 12 - Whole Leaves wants to upgrade their equipment, and...Ch. 12 - Reference Figure 12.15 and use the following...Ch. 12 - Marc Associates employs Janet Evanovich at its...Ch. 12 - In EB13, you prepared the journal entries for...Ch. 12 - An employee and employer cost-share 401(k) plan...Ch. 12 - Consider the following situations and determine...Ch. 12 - Stork Enterprises delivers care packages for...Ch. 12 - Review the following transactions, and prepare any...Ch. 12 - Review the following transactions, and prepare any...Ch. 12 - Review the following transactions, and prepare any...Ch. 12 - Machine Corp. has several pending lawsuits against...Ch. 12 - Emperor Pool Services provides pool cleaning and...Ch. 12 - Serene Company purchases fountains for its...Ch. 12 - Mohammed LLC is a growing consulting firm. The...Ch. 12 - Lemur Corp. is going to pay three employees a...Ch. 12 - Record the journal entries for each of the...Ch. 12 - Consider the following situations and determine...Ch. 12 - Perfume Depot sells two different tiers of perfume...Ch. 12 - Review the following transactions, and prepare any...Ch. 12 - Review the following transactions and prepare any...Ch. 12 - Review the following transactions and prepare any...Ch. 12 - Roundhouse Tools has several potential warranty...Ch. 12 - Shoe Hut sells custom, handmade shoes. It offers a...Ch. 12 - Air Compressors Inc. purchases compressor parts...Ch. 12 - Pickles R Us is a pickle farm located in the...Ch. 12 - Use Figure 12.15 to complete the following...Ch. 12 - Use the information from PB10 to complete this...
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