1. Hebrides Corp. has an employee benefit plan for compensated absences that gives employees 10 paid vacation days and 10 paid sick days. Both vacation and sick days can be carried over indefinitely. Employees can elect to receive payment in lieu of vacation days; however, no payment is given for sick days not taken. Hebrides allows the use of sick days without objective evidence of sickness. At December 31, 2014, Hebrides's unadjusted balance of liability for compensated absences was $10,000. Hebrides estimated that there were 250 vacation days and 100 sick days available at December 31, 2014. Hebrides's employees earn an average of $100 per day but will receive raises such that the average daily pay in 2015 will be $110. In its December 31, 2014, balance sheet, what amount of liability for compensated absences is Hebrides required to report?

a. $25,000

b. $38,500

c. $35,000

d. $27,500

2. Irkalla Co. has the following liabilities at December 31, 2014:

Trade accounts payable	$	200,000
Short-term borrowings	$	100,000
Bank loan, payable annually over 20 years, with a current portion of $100,000	$	2,000,000
Other bank loan, matures June 30, 2015	$	1,000,000

The bank loan of $2,000,000 requires Irkalla to maintain certain financial ratios but Irkalla has not been able to do so and is in violation of the loan agreement. The creditor has not waived its rights in regard to the loan. What amount should Irkalla report as current liabilities at December 31, 2014?

a. $3,300,000

b. $1,400,000

c. $3,100,000

d. $1,200,000

3. Zeta, Ltd., a company that prepares its financial statements in accordance with IFRS, has the following pending items at December 31, 2014.

The company is the defendant in a product liability lawsuit as a result of injuries incurred by purchasers of its products. Legal counsel has indicated that an unfavorable verdict in the amount of $650,000 is probable.

The company is involved in another lawsuit and their legal counsel believes it is reasonably possible that the lawsuit will result in a loss of $175,000.

The entity sells a product that is subject to a warranty. The estimated warranty liability is $150,000.

In its financial statements for the period ended December 31, 2014, how much will be reported either on the balance sheet or in the footnotes for contingencies and how much for provisions?

a. A contingency of $650,000 will be accrued, a contingency of $175,000 will be disclosed, and a provision of $150,000 will be accrued as a liability.

b. A contingency of $175,000 will be disclosed and provisions of $800,000 will be accrued as liabilities.

c. Contingencies of $825,000 will be accrued and a provision of $150,000 will be accrued as a liability.

d. Contingencies of $800,000 will be accrued and a provision of $175,000 will be disclosed.

4. The following information pertains to Carson Corp. as of December 31, 2014:

Dividends in arrears on cumulative preferred stock 2014 dividends on preferred stock, will be declared in January 2015 2014 dividends on common stock, will be declared in January 2015 CEO bonus for 2014, will be paid in February 2015 What amount should Carson report as current liabilities on its balance sheet at December 31, 2014?

a. $30,000

b. $200,000

c. $160,000

d. $170,000

5. InterSlice Co.s payroll for the month ended March 31, 2014, is summarized as follows:

Total wages	$	12,000
Federal income tax withheld	$	1,440

All wages paid were subject to FICA. FICA tax rates were 7% each for employee and employer. In InterSlices jurisdiction employers must also pay unemployment taxes under FUTA at a 2% rate. InterSlice remits taxes on the 15th of the following month. As a result of March 2014 wages, what amounts should InterSlice record in its journal entry for March payroll tax liability and March withholdings due to IRS?

Payroll Tax Liability l Withholdings due to IRS

a.$1,080 $2,280

b.$840 $2,520

c.$1,080 $1,440

d.$2,280 $2,520

a. option a

b. option b

c. option c

d. option d