2 of 8 Problem 3 On February 5, 1993, an employee filed a $2,000,...

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2 of 8 Problem 3 On February 5, 1993, an employee filed a $2,000,000 lawsuit against Steel Co. for damages suffered when one of Steel's plants exploded on December 29, 1992. Steel's legal counsel expects the company will lose the lawsuit and estimates the loss to be between $500,000 and $1,000,000. The employee has offered to settle the lawsuit out of court for $900,000, but Steel will not agree to the settlement. In its December 31, 1992, balance sheet, what amount should Steel report as liability from lawsuit? A-$2,000,000 B-$1,000,000 C-$900,000 D- $500,000 Problem 4 Mill Co.'s trial balance included the following account balances at December 31, 1992: Accounts Payable $15,000 Bonds payable, due 1993 25,000 Discount on bonds payable, 3,000 due in 1993 Dividends payable 1/31/1993 8,000 Notes payable, due 1994 20,000 What amount should be included in the current liability section of Mill's December 31, 1992, balance sheet? A-$45,000 B-$51,000 C-$65,000 D-$78,000 Problem 5 On January 31, 1992, Beau Corp. Issued $300,000 maturity value, 12% bonds for $300,000 cash. The bonds are dated December 31, 1991, and mature on December 31, 2001. Interest will be paid semiannually on June 30 and December 31. What amount of accrued interest payable should Beau report in its September 30, 1992, balance sheet? A-$27,000 B-$24,000 C-$18,000 D-S9,000 Problem 6 Lyle, Inc. is preparing its financial statements for the year ended December 31, 1992. Accounts payable amounted to $360,000 before any necessary year end adjustment related to the following: At December 31, 1992, Lyle has a $50,000 debit balance in its accounts payable to Ross, a supplier, resulting from a $50,000 advance payment for goods to be manufactured to Lyle's specifications. Checks in the amount of $100,000 were written to vendors and recorded on December 29, 1992. The checks mailed on January 5, 1993. What amount should Lyle report as accounts payable in its December 31, 1992, balance sheet? A-$510,000 B-$410,000 C-$310,000 D-$210,000 Problem 8 For the week ended June 30, 1995, Free Co. paid gross wages of $20,000, from which federal income taxes of $2,500 and FICA were withheld. All wages paid were subject to FICA tax rates of &% each for employer and employee. Free makes all payroll- related disbursements form a special payroll checking account. What amount should Free have deposited in the payroll checking account to cover net payroll and related payroll taxes for the week ended June 30, 1995? Problem 9 Eagle Co. has cosigned the mortgage note on the home of its president, guaranteeing the indebtedness in the event that the president should default. Eagle considers the likelihood of default to be remote. How should the guarantee be treated in Eagle's financial statements? A-Disclosed only. B-Accrued only. C-Accrued and Disclosed. D-Neither accrued nor disclosed. Problem 10 During 1994, Half Co. became involved in a tax dispute with the IRS. At December 31, 1994, Halt's tax advisor believed that an unfavorable outcome was probable. A reasonable estimate of additional taxes was $200,000 but could be as much as $300,000. After the 1994 financial statements were issued, Half received and accepted an IRS settlement offer of $275,000. What amount of accrued liability should Haft have reported in its December 31, 1994 balance sheet? Problem 11 Lime Co.'s payroll for the month ended January 31, 1995, is summarized follows: Total wages $10,000 Federal income tax withheld 1,200 All wages paid were subject to FICA. FICA tax rates were 7% each for employee and employer. Lime remits payroll taxes on the 15th of the following month. In its financial statements for the month ended January 31, 1995, what amount should Lime report as total payroll tax liability and as payroll tax expenses? Liability Expenses A. $1,200 $1,400 B. $1,900 $1,400 C. $1,900 $700 D. $2,600 $700 Problem 12 On March 1, 1993, Fine Co. borrowed $10,000 and signed a two-year note bearing interest at 12% per annum compounded annually. Interest is payable in full on February 28, 1995. What amount should Fine report as a liability for accrued interest at December 31, 1994? A.SO B.1,000 C.1,200 D.2,320 Problem 13 (IVU) Ivy Co. operates a retail store. All items are sold subject to a 6% state tax, which Ivy collects and records as sales revenues. Ivy files quarterly sales tax returns when due, by the 20th day following the end of the sales quarter. However, in accordance with state requirements, Ivy remits sales tax collected by the 20th day of the month following any month such collections exceed $500. Ivy takes these payments as credits on the quarterly sales tax return. The sales taxes paid by Ivy are charged against sales revenue. Following is a monthly summary appearing in Ivy's first quarter 1995 sales revenue account: Debit Credit January $0 $10,600 February $600 $7,420 March $0 $8,480 Total $600 $26,500 In its March 31, 1995, balance sheet, what amount should Ivy report as sales taxes payable? Problem 15 The discount resulting from the determination of a note payable's present value should be reported on the balance sheet as a (an). A. Addition to the face amount of the note. B. Deferred charge separate from the note. C. Deferred credit separate from the note. D. Direct reduction from the face amount of the note.

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Problem 3 B $1,000,000.00

Problem 4 A $45,000.00...

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