Financial Accounting = 5 marksHow should a company account for returns of defective productsunder a lifetime warranty program?a) Record as contingent liability onlyb) Recognize provision based on historical return patternsc) Wait until actual returns occurd) Create a deferred revenue account

Explanation of Lifetime Warranty: A lifetime warranty is a guarantee from a company to repair or…

Answered: Financial Accounting = 5 marks How…

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter14: Activities Required In Completing A Quality Audit

Section: Chapter Questions

Problem 65RSCQ

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K GAAP requires companies to method to record bad debts expense. OA. use the allowance OB. use the fair value OC. select either the direct write-off or allowance O D. use the direct write - off
Which of the following is a liability created when a company receives cash for services to be provided in the future? Select one: a. Unearned revenue b. Estimated warranty payable c. Service revenue d. Accrued liability
Alternative Accounting Treatments a. Estimate the amount of liability and record. b. Do not record as a liability but disclose in a footnote to the financial statements. c. Neither record as a liability nor disclose in a footnote to the financial statements. Required: Match the appropriate alternative accounting treatment with each of the potential contingent liabilities listed below. Potential Contingent Liabilities 1. Income taxes related to revenue included in net income this year but taxable in a future year. 2. Potential costs in future periods associated with performing warranty services on products sold this period. 3. Estimated cost of future services under a product warranty related to past sales. 4. Estimated cost of future services under a product warranty related to future sales. 5. Estimated cost of pension benefits related to past employee services that has yet to be funded. 6. Potential loss on environmental cleanup suit against company; a court judgment against the…
Use the following to answer questions 1– 5 Reporting Method A. Current Liability B. Long term liability C. Disclosure note only D. Not reported Select the correct reporting method for each of the items listed below: 1. Accounts payable Bond payable. 3. Sales tax collected from customers. 4. Unused line of credit. A contingent liability with a reasonably possible likelihood of occurring within the next 5. year and cannot be estimated. 2.
pp
1.Which of the following is not an acceptable presentation of current liabilities? Listing current liabilities according to amount. Offsetting current liabilities against current assets. Listing current liabilities in the order of maturity. Showing current liabilities in the order of liquidation. 2. A deferred revenue not collectible within 1 year is a Non-current liability Current Liability Neither a current liability or a non-current liability Can be a current liability or a non-current liability 3. For a debt restructuring involving substantial modification of terms, it is appropriate for a debtor to recognize a gain when the carrying amount of the debt: Exceeds the total future cash payments. Exceeds the present value of the future cash payments. Is less than present value of future cash payments. Is less than the total future cash payments. 4. The major difference between convertible bonds and bonds issued with share warrants is that upon exercise of the warrants The…
Warranty expenses result when a company sells products then estimates the units and cost per unit for repairs and replacements that may occur during the warranty period. True False
Which method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance method
Which of the following statements regarding liabilities is false? Multiple Choice A liability is a probable future payment of assets or services that a company is presently obligated to make as a result of past transactions or events. Potential future wages to be paid to employees should be recorded as liabilities. Long-term liabilities are obligations due after one year, or the company’s operating cycle if longer. Liabilities are classified as either current or long term. Liabilities can involve uncertainty in whom to pay.
Question 2 In each case state which concept or concepts are relevant to the situation given. a. Subtracting an amount paid for insurance because it belongs to the next year. b. Maintain the same percentage rate of the provision for doubtful debts despite it not being always accurate in predicting future bade debts c. Valuing inventory at likely selling price for a successful business d. Valuing a non-current asset at its likely market value.
not use ai please

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Financial Accounting = 5 marks How should a company account for returns of defective products under a lifetime warranty program? a) Record as contingent liability only b) Recognize provision based on historical return patterns c) Wait until actual returns occur d) Create a deferred revenue account