1) On December 31, Year 2, Paxton Co. had a note payable due on August 1, Year 3.On January 20, Year 3, Paxton signed a financing agreement to borrow the balance of the note payable from a lending institution to refinance the note.The agreement does not expire within one year, and no violation of any provision in the financing agreement exists.On February 1, Year 3, Paxton was informed by its financial advisor that the lender is not expected to be financially capable of honoring the agreement.Paxton's financial statements were issued on March 31, Year 3.How should Paxton classify the note on its balance sheet at December 31, Year 2?

A.As a current liability because the financing agreement was signed after the balance sheet date.

B.As a current liability because the lender isnotexpected to be financially capable of honoring the agreement.

C.As a long-term liability because the agreement doesnotexpire within one year.

D.As a long-term liability becausenoviolation of any provision in the financing agreement exists.

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2) Phylonoe, Inc., a company that prepares its financial statements in accordance with IFRS, has a $10,000,000 note payable that comes due on October 1, 20X4.The company has both the ability and the intent to refinance the obligation on a long-term basis.As of December 31, 20X3, it has entered into an agreement with a financial institution that allows it to refinance $4,000,000 for a 24-month period.In addition, it intends to issue a new 20-year $6,000,000 bond in February 20X4 and knows that it will be able to because it has excellent credit and the bond market is very strong.How will Phylonoe report this on their balance sheet at December 31, 20X3?

A. The entire $10,000,000 will be reported as a noncurrent liability because Phylonoe has both the intent and ability to refinance within 60 days of the balance sheet date.

B. $6,000,000 will be reported as a noncurrent liability and the remaining $4,000,000 will be reported as a current liability.

C. $4,000,000 will be reported as a noncurrent liability and the remaining $6,000,000 will be reported as a current liability.

D. The entire $10,000,000 will be reported as a current liability

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3) For a troubled debt restructuring involving only a modification of terms, which of the following items specified by the new terms would be compared to the carrying amount of the debt to determine if the debtor should report a gain on restructuring?

A.The total future cash payments.

B.The present value of the debt at the original interest rate.

C.The present value of the debt at the modified interest rate.

D.The amount of future cash payments designated as principal repayments

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4) 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.

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5) Ames, Inc. has $500,000 of notes payable due June 15, Year 6.Ames signed an agreement on December 1, Year 5, to borrow up to $500,000 to refinance the notes payable on a long-term basis with no payments due until Year 7.The financing agreement stipulated that borrowings may not exceed 80% of the value of the collateral Ames was providing.At the date of issuance of the December 31, Year 5, financial statements, the value of the collateral was $600,000 and is not expected to fall below this amount during Year 6.How should the obligation for these notes payable be classified in Ames's December 31, Year 5, balance sheet?

A. Current liabilities of $500,000; long-term liabilities of $0.

B. Current liabilities of $100,000; long-term liabilities of $400,000.

C. Current liabilities of $20,000; long-term liabilities of $480,000.

D. Current liabilities of $0; long-term liabilities of $500,000

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6) On December 31, Year 1, Taylor, Inc. signed a binding agreement with a bank for the refinancing of an existing note payable that was scheduled to mature in February, Year 2.The terms of the refinancing included extending the maturity date of the note by three years.On January 15, Year 2, the note was refinanced.How should Taylor report the note payable in its December 31, Year 1, balance sheet?

A. A current liability.

B. A long-term liability.

C. A current liability and a long-term liability.

D. As equity

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7) During 20X5, Haft Co. became involved in a tax dispute with the IRS. At December 31, 20X5, Haft'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 20X5 financial statements were issued, Haft received and accepted an IRS settlement offer of $275,000. What amount of accrued liability should Haft have reported in its December 31, 20X5 balance sheet?

A. $200,000

B. $250,000

C. $275,000

D. $300,000

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8) Willem Co. reported the following liabilities at December 31, Year 1:

Accounts payable-trade $750,000

Short-term borrowings 400,000

Mortgage payable, current portion $100,000 3,500,000

Other bank loan, matures June 30, Year 2 1,000,000

The $1,000,000 bank loan was refinanced with a 20-year loan on January 15, Year 2, with the first principal payment due January 15, Year 3.Willem's audited financial statements were issued February 28, Year 2.What amount should Willem report as current liabilities at December 31, Year 1?

A. $850,000

B. $1,150,000

C. $1,250,000

D. $2,250,000

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9) Wilk Co. reported the following liabilities at December 31, Year 1:

Accounts payable-trade $750,000

Short-term borrowings 400,000

Loan from Bank I, current portion $100,000 3,500,000

Loan from Bank II, matures June 30, Year 2 1,000,000

The bank loan of $3,500,000 was in violation of the loan agreement.The creditor had not waived the rights for the loan.What amount should Wilk report as current liabilities at December 31, Year 1?

A. $1,250,000

B. $2,150,000

C. $2,250,000

D. $5,650,000

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10) The following information pertains to Carson Corp. as of December 31, 20X4:

Dividends in arrears on cumulative preferred stock $120,000

20X4 dividends on preferred stock, will be declared in January 20X5 $30,000

20X4 dividends on common stock, will be declared in January 20X5 $20,000

CEO bonus for 20X4, will be paid in February 20X5 $30,000

What amount should Carson report as current liabilities on its balance sheet at December 31, 20X4?

A. $30,000

B. $200,000

C. $160,000

D. $170,000