17.Which of the following would appear on the statement of financial position as a current liability?

	a.	a probable loss in the amount of $4 million from an ongoing lawsuit
	b.	a possible loss in the amount of $4 million from an ongoing lawsuit
	c.	a probable loss from an ongoing lawsuit, the amount of which is not yet determinable
	d.	a lawsuit for $4 million for which the likelihood of loss is remote

18. Chastain Park Entertainment paid salaries expense of $350,000 during Year 1. However, additional salaries of $20,000 had been earned by employees, but not paid or recorded at December 31, Year 1.

Refer to Chastain Park Entertainment. Under the accrual basis of accounting, what is the total amount of salaries payable to be reported at December 31, Year 1?

	a.	$0
	b.	$20,000
	c.	$350,000
	d.	$370,000

19. Fionas Italian Market purchased a delivery truck for $25,000 at the beginning of Year 1. The truck has an estimated life of five years and an estimated residual value of $5,000. The company plans to use the straight-line depreciation method. At the beginning of Year 2, the company spent $4,000 to replace the trucks transmission. This resulted in a two-year extension of useful life, but no change in residual value.

Refer to Fionas Italian Market. What is the amount of depreciation expense for Year 2?

	a.	$2,667
	b.	$3,333
	c.	$4,167
	d.	$4,800

20. On January 1, Year 1, Kaleidoscope Paint issued $500,000, 10-year, 9% bonds for $480,745. The bonds pay interest on June 30 and December 31. The market rate is 10%. The company plans to use the effective interest method of amortizing bond discounts and premiums.

Refer to Kaleidoscope Paint. What will be the cash payment on June 30, Year 1?

	a.	$22,500
	b.	$25,000
	c.	$45,000
	d.	$50,000

21. Selected financial data for Rescue Rooter are presented below:

	Year 2	Year 1
Total liabilities	$1,205,000	$952,000
Common shares	250,000	225,000
Paid-in capital in excess of parcommon shares	150,000	135,000
Retained earnings	155,000	145,000

Refer to Rescue Rooter. What does the debt-to-equity ratio for Year 2 indicate?

	a.	It is increasing, which may be a cause of concern for the company.
	b.	It is increasing, which is always a good sign from the viewpoint of investors.
	c.	It is decreasing, which may be a cause of concern for the company.
	d.	It is decreasing, which is always a good sign from the viewpoint of investors.

22.Dietz Inc. sells merchandise on credit. If a customer pays its balance due within the discount period, what is the effect of the payment on Dietzs accounting equation, assuming the sale has already been appropriately recorded?

	a.	Assets and shareholders equity decrease.
	b.	Assets and shareholders equity increase.
	c.	Assets decrease and liabilities increase.
	d.	Shareholders equity decreases and liabilities increase.