• Home
  • Textbooks
  • Intermediate Accounting
  • Current Liabilities and Contingencies

Intermediate Accounting

Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

Chapter 13

Current Liabilities and Contingencies - all with Video Answers

Educators

Chapter Questions

01:10

Problem 1

Distinguish between a current liability and a long-term debt

Nick Johnson
Nick Johnson
Numerade Educator
01:06

Problem 2

Assume that your friend Will Morris, who is a music major, asks you to define and discuss the nature of a liability. Assist him by preparing a definition of a liability and by explaining to him what you believe are the elements or factors inherent in the concept of a liability.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
02:00

Problem 3

Why is the liabilities section of the balance sheet of primary significance to bankers?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
02:55

Problem 4

How are current liabilities related by definition to current assets? How are current liabilities related to a company's operating cycle?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
02:25

Problem 5

Leon Wight, a newly hired loan analyst, is examining the current liabilities of a corporate loan applicant. He observes that unearned revenues have declined in the current year compared to the prior year. Is this a positive indicator about the client's liquidity? Explain.

Puneet Prajapati
Puneet Prajapati
Numerade Educator
01:06

Problem 6

How is present value related to the concept of a liability?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
04:40

Problem 7

What is the nature of a "discount" on notes payable?

Shazia Naz
Shazia Naz
Numerade Educator
02:25

Problem 8

How should a debt callable by the creditor be reported in the debtor's financial statements?

Puneet Prajapati
Puneet Prajapati
Numerade Educator
01:10

Problem 9

Under what conditions should a short-term obligation be excluded from current liabilities?

Nick Johnson
Nick Johnson
Numerade Educator
00:23

Problem 10

What evidence is necessary to demonstrate the ability to consummate the refinancing of short-term debt?

Amy Jiang
Amy Jiang
Numerade Educator
05:50

Problem 11

Discuss the accounting treatment or disclosure that should be accorded a declared but unpaid cash dividend; an accumulated but undeclared dividend on cumulative preferred stock; a stock dividend distributable

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
03:40

Problem 12

How does unearned revenue arise? Why can it be classified properly as a current liability? Give several examples of business activities that result in unearned revenues.

Puneet Prajapati
Puneet Prajapati
Numerade Educator
00:14

Problem 13

What are compensated absences?

Sam Limsuwannarot
Sam Limsuwannarot
Numerade Educator
03:15

Problem 14

Under what conditions must an employer accrue a liability for the cost of compensated absences?

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
03:15

Problem 15

Under what conditions is an employer required to accrue a liability for sick pay? Under what conditions is an employer permitted but not required to accrue a liability for sick pay?

Banhishikha Sinha
Banhishikha Sinha
Numerade Educator
00:00

Problem 16

Faith Battle operates a health food store, and she has been the only employee. Her business is growing, and she is considering hiring some additional staff to help her in the store. Explain to her the various payroll deductions that she will have to account for, including their potential impact on her financial statements, if she hires additional staff.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
01:44

Problem 17

Define (a) a contingency and (b) a contingent liability.

Ummatul Choudary
Ummatul Choudary
Numerade Educator
01:06

Problem 18

Under what conditions should a contingent liability be recorded?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
01:10

Problem 19

Distinguish between a current liability and a contingent liability. Give two examples of each type.

Nick Johnson
Nick Johnson
Numerade Educator
00:32

Problem 20

How are the terms "probable," "reasonably possible," and "remote" related to contingent liabilities?

Nick Johnson
Nick Johnson
Numerade Educator
02:29

Problem 21

Contrast the cash-basis method and the accrual method
of accounting for warranty costs.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
00:26

Problem 22

Grant Company has had a record-breaking year in terms of growth in sales and profitability. However, market research indicates that it will experience operating losses in two of its major businesses next year. The controller has proposed that the company record a provision for these future losses this year, since it can afford to take the charge and still show good results. Advise the controller on the appropriateness of this charge.

Amy Jiang
Amy Jiang
Numerade Educator
02:29

Problem 23

How does the expense warranty approach differ from the sales warranty approach?

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator
05:42

Problem 24

Southeast Airlines Inc, awards members of its Flightline program a second ticket at half price, valid for 2 years anywhere on its flight system, when a full-price ticket is purchased. How would you account for the full-fare and half-fare tickets?

Carson Merrill
Carson Merrill
Numerade Educator
05:42

Problem 25

Pacific Airlines Co. awards members of its Frequent Fliers Club one free round-trip ticket, anywhere on its flight system, for every 50,000 miles flown on its planes. How would you account for the free ticket award?

Carson Merrill
Carson Merrill
Numerade Educator
02:44

Problem 26

When must a company recognize an asset retirement obligation?

Mihir Nayar
Mihir Nayar
Numerade Educator
01:24

Problem 27

Should a liability be recorded for risk of loss due to lack of insurance coverage? Discuss.

EA
Erwin Antoni
Numerade Educator
01:11

Problem 28

What factors must be considered in determining whether or not to record a liability for pending litigation? For threatened litigation?

Narayan Hari
Narayan Hari
Numerade Educator
02:23

Problem 29

Within the current liabilities section, how do you believe the accounts should be listed? Defend your position.

Jennifer Stoner
Jennifer Stoner
Numerade Educator
01:02

Problem 30

How does the acid-test ratio differ from the current ratio? How are they similar?

Linh Vu
Linh Vu
Numerade Educator
02:34

Problem 31

When should liabilities for each of the following items be recorded on the books of an ordinary business corporation?
(a) Acquisition of goods by purchase on credit.
(b) Officers ' salaries.
(c) Special bonus to employees.
(d) Dividends.
(e) Purchase commitments.

Oluwadamilola Ameobi
Oluwadamilola Ameobi
Numerade Educator