Cornerstones of Financial Accounting

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ISBN: 9781337690881

Author: Jay Rich, Jeff Jones

Publisher: Cengage Learning

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Cornerstones of Financial Accounting

Current And Contingent Liabilities. 81.2C

BusinessAccountingCornerstones of Financial AccountingWarranty Expense: A company may issue warranty with the sale of its product which bounds the company to replace or repair in case of quality failure according to the terms of the warranty. The provision for the estimated warranty liability is made at the time of sale of the products and warranty expense is recorded. This provision is utilized at the time of performing the warranty contract. Current Ratio: Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows: C u r r e n t R a t i o = C u r r e n t a s s e t s C u r r e n t l i a b i l i t i e s To indicate: The decision for Jim.

Question

Chapter 8, Problem 81.2C

To determine

**Concept introduction:**

**Warranty Expense:**

A company may issue warranty with the sale of its product which bounds the company to replace or repair in case of quality failure according to the terms of the warranty. The provision for the estimated warranty liability is made at the time of sale of the products and warranty expense is recorded. This provision is utilized at the time of performing the warranty contract.

**Current Ratio:**

Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:

**To indicate:**

The decision for Jim.

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Cornerstones of Financial Accounting

4th Edition

ISBN: 9781337690881

Author: Jay Rich, Jeff Jones

Publisher: Cengage Learning

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Cornerstones of Financial Accounting

Current And Contingent Liabilities. 81.2C

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Cornerstones of Financial Accounting

Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ

Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - Prob. 10MCQCh. 8 - Prob. 11MCQCh. 8 - Prob. 12MCQCh. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Prob. 18MCQCh. 8 - Prob. 19CECh. 8 - Prob. 20CECh. 8 - Prob. 21CECh. 8 - Prob. 22CECh. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Prob. 25CECh. 8 - Prob. 26CECh. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Prob. 29CECh. 8 - Prob. 30CECh. 8 - Prob. 31CECh. 8 - Prob. 32CECh. 8 - Prob. 33CECh. 8 - Prob. 34CECh. 8 - Prob. 35BECh. 8 - Prob. 36BECh. 8 - Prob. 37BECh. 8 - Prob. 38BECh. 8 - Prob. 39BECh. 8 - Prob. 40BECh. 8 - Prob. 41BECh. 8 - Prob. 42BECh. 8 - Prob. 43BECh. 8 - Prob. 44BECh. 8 - Prob. 45BECh. 8 - Prob. 46BECh. 8 - Prob. 47BECh. 8 - Prob. 48BECh. 8 - Prob. 49BECh. 8 - Prob. 50BECh. 8 - Prob. 51BECh. 8 - Prob. 52BECh. 8 - Prob. 53BECh. 8 - Prob. 54BECh. 8 - Prob. 55BECh. 8 - Prob. 56BECh. 8 - Prob. 57BECh. 8 - Prob. 58BECh. 8 - Prob. 59BECh. 8 - Prob. 60ECh. 8 - Prob. 61ECh. 8 - Prob. 62ECh. 8 - Prob. 63ECh. 8 - Prob. 64ECh. 8 - Prob. 65ECh. 8 - Prob. 66ECh. 8 - Prob. 67ECh. 8 - Prob. 68ECh. 8 - Prob. 69ECh. 8 - Prob. 70ECh. 8 - Prob. 71ECh. 8 - Prob. 72ECh. 8 - Prob. 73APSACh. 8 - Prob. 74APSACh. 8 - Prob. 75APSACh. 8 - Prob. 76APSACh. 8 - Prob. 77APSACh. 8 - Prob. 78APSACh. 8 - Prob. 79APSACh. 8 - Prob. 80APSACh. 8 - Prob. 73BPSBCh. 8 - Prob. 74BPSBCh. 8 - Prob. 75BPSBCh. 8 - Prob. 76BPSBCh. 8 - Prob. 77BPSBCh. 8 - Prob. 78BPSBCh. 8 - Prob. 79BPSBCh. 8 - Prob. 80BPSBCh. 8 - Prob. 81.1CCh. 8 - Prob. 81.2CCh. 8 - Prob. 81.3CCh. 8 - Prob. 82.1CCh. 8 - Prob. 82.2CCh. 8 - Prob. 82.3CCh. 8 - Prob. 83.1CCh. 8 - Prob. 83.2CCh. 8 - Prob. 83.3CCh. 8 - Prob. 83.4CCh. 8 - Prob. 83.5CCh. 8 - Prob. 83.6CCh. 8 - Prob. 83.7CCh. 8 - Prob. 83.8CCh. 8 - Prob. 83.9CCh. 8 - Prob. 84.1CCh. 8 - Prob. 84.2CCh. 8 - Prob. 84.3CCh. 8 - Prob. 84.4CCh. 8 - Prob. 84.5CCh. 8 - Prob. 84.6CCh. 8 - Prob. 84.7CCh. 8 - Prob. 84.8CCh. 8 - Prob. 85.1CCh. 8 - Prob. 85.2CCh. 8 - Prob. 85.3C

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Which of the following does not relate to credit risks?
Select one:
A. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations
B. Credit risk also describes the risk that an insurance company will be able to pay a claim.
C. It refers to the risk that a lender may not receive the owed principal and interest
D. Credit risk describes the risk that a bond issuer may fail to make payment when requested
E. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan

A guarantee issued by an FI that obligates the FI to pay if the purchaser of the letter defaults on a debt is called a
a.
loan commitment.
b.
forward rate agreement.
c.
credit swap agreement.
d.
collar.
e.
None of these options are correct.

When an entity breaches a covenant under a long-term loan agreement on or before the end of the reporting periodwith the effect that the liability becomes payable on demand, the liability is classified as noncurrent whenI. The lender has agreed after the end if the reporting period and before the financial statements areauthorized for issue not to demand payment as a consequence of the breach.II. The lender has agreed on or before the end of the reporting period to provide a grace period ending atleast twelve months after that date.
a. Both I and IIb. Neither I and IIc. I onlyd. II only

Which of the following is true of a maturity date? A. It must be calculated in days, not in months or years. B. It is the date when principal and interest on a note are to be repaid to the lender. C. It is the date of establishment of note terms between a lender and customer. D. It is not a characteristic of a note receivable.

Canceling the original loan and signing a new loan agreement with different terms to settle troubled debts is called what?
a) Prolongation
b )Settlement
c) Nullification
d) Continuation with modification of debt terms

Repricing risk refers to:
Question 11 options:
Risk of a change to the maturity of a credit
Risk from a change to the interest rate on a loan
Risk from reclassification of the creditworthiness of the borrower
Risk of a change to the repayment schedule of a loan

Which of the following does not relate to credit risks?
a. Credit risk is the possibility of losing a lender takes on due to the possibility of a borrower not paying back a loan
b. It refers to the risk that a lender may not receive the owed principal and interest
c. Credit risk also describes the risk that an insurance company will be able to pay a claim.
d. Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations
e. Credit risk describes the risk that a bond issuer may fail to make payment when requested

When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect that the liability becomes payable on demand, the liability is classified as
Current under all circumstances
Noncurrent under all circumstances
Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand payment as a consequence of the breach.
Noncurrent if the lender agreed after the reporting period to provide grace period for at least twelve months after the reporting period.

Access the FASB Accounting Standards Codification at the FASB website ( www.fasb.org ). Determine the specific citation for accounting for each of the following items: 1. Disclosure requirements for maturities of long-term debt. 2. How to estimate the value of a note when a note having no ready market and no interest rate is exchanged for a noncash asset without a readily available fair value. 3. When the straight-line method can be used as an alternative to the interest method of determining interest.

what are two types of credit
what is a security interest
who is the debtor and creditor
what happens if the debtor defaults
what type of transaction requires a financing statement

TRUE OR FALSE?
The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.

TRUE OR FALSE?The effect of a lender agreeing to give the borrowing entity a grace period after the reporting period will make a liability current.

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