test 1 results updated solutions guide with last problem%20updated

Test 1 results updated solutions guide with last problem%20updated

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1. Which of the following is not a characteristic of a liability? A. It represents a probable, future sacrifice of economic benefits. B. It must be payable in cash. C. It arises from present obligations to other entities. D. It results from past transactions or events. 2. Current liabilities normally are recorded at their: A. Present value. B. Cost. C. Maturity amount. D. Expected value. 3. When cash is received from customers in the form of a refundable deposit, the cash account is increased with a corresponding increase in: A. A current liability. B. Revenue. C. Shareholders' equity. D. Paid-in capital. 4. A discount on a noninterest-bearing note payable is classified in the balance sheet as: A. An asset. B. A component of shareholders' equity. C. A contingent liability. D. A contra liability.
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5. Jane's Donut Co. borrowed $200,000 on January 1, 2011, and signed a two-year note bearing interest at 12%. Interest is payable in full at maturity on January 1, 2013. In connection with this note, Jane's should report interest expense at December 31, 2011, in the amount of: A. $0. B. $24,000. C. $48,000. D. $50,880. $200,000 x 12% x 12/12 = $24,000 6. Oklahoma Oil Corp. paid interest of $785,000 during 2011, and the interest payable account decreased by $125,000. What was interest expense for the year? A. $890,000. B. $660,000. C. $555,000. D. $785,000.
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7. M Corp. has an employee benefit plan for compensated absences that gives employees 15 paid vacation days. Vacation days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days. At December 31, 2011, M's unadjusted balance of liability for compensated absences was $30,000. M estimated that there were 200 vacation days available at December 31, 2011. M's employees earn an average of $150 per day. In its December 31, 2011, balance sheet, what amount of liability for compensated absences is M required to report? A. $0. B. $30,000. C. $225,000. D. $450,000. The liability for compensated absences at December 31, 2011, is $30,000 for the 200 vacation days times $150 per day. 8. Lake Co. receives nonrefundable advance payments with special orders for containers constructed to customer specifications. Related information for 2011 is as follows ($ in millions): What amount should Lake report as a current liability for advances from customers in its Dec. 31, 2011, balance sheet? A. $0. B. $80. C. $125. D. $170. $110 + 195 - 180 - 45 = $80 9. Peterson Photoshop sold $1000 of gift cards on a special promotion on October 15, 2011, and sold $1500 of gift cards on another special promotion on November 15, 2011. Of the cards sold in October, $100 were redeemed in October, $250 in November, and $300 in December. Of the cards sold in November, $150 were redeemed in November and $350 were redeemed in December. Peterson views the probability of redemption of a gift card as remote if the card has not been redeemed within two months. At 12/31/2011, Peterson would show an unearned revenue account for their gift cards with a balance of:
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Test 1 results updated solutions guide with last problem%20updated

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