1.Heatseaker Ltdproduces and sells toasters.Heatseaker Ltd provides a one-year replacement warranty on the toasters it sells. Heatseaker Ltd costs of producing one toaster is $50 and it sells each toaster for $100. During the year ending 30 June 2019, Heatseeker Ltd has sold 4,000 toasters. Based on its previous experience, Heatseaker Ltd has recognised a warranty provision of $23,000 for the financial year ending 30 June 2019. During the financial year ending 30 June 2019, customers returned 500 toasters that was faulty. The journal entry in relation to Heatseaker Ltd's replacement of faulty products for the year ending 30 June 2019, would be:

Select one:

a.Dr Warranty Expense$50,000

Cr Provision for Warranty$50,000

b.Dr Warranty Expense$2,000

Dr Provision for Warranty$23,000

Cr Inventory$25,000

c.Dr Warranty Expense$27,000

Dr Provision for Warranty$23,000

Cr Inventory$50,000

d.Dr Provision for Warranty$50,000

Cr Inventory$50,000

e.Dr Warranty Expense$23,000

Dr Provision for Warranty$2,000

Cr Cash$25,000

2.Given the following information, when should a contingent liability be shown by way of a note to the accounts?

i. Estimation procedures were necessary to determine its amount.

ii. There is significant uncertainty as to whether a sacrifice of future economic benefits will be require

iii. The amount of the obligation cannot be measured reliably.

Select one:

a.ii and iii

b.In all the other options

c.None of the other options

d.i and ii

e.i and iii

3.Auditors inform a company that its provision for long-service leave was understated by $46 000 at 30 June 2019, and that the account should be adjusted. The company adjusted the account so that:

Select one:

a.liabilities increase and profit decreases.

b.profit increases, but there is no effect on liabilities.

c.liabilities increase but profit is unaffected.

d.there is no effect on either profit or liabilities.

e.liabilities increase and profit increases.

4.SharkAttack Ltd has been sued by a competitor for a potential copyright infringement. Legal advice is uncertain over the likelihood of the success of the claim and the likely damages, if any. This would be shown as:

Select one:

a.a contingent liability on the balance sheet.

b.an accrual on the balance sheet.

c.a contingent liability in the notes to the accounts.

d.a provision on the balance sheet.

e.Not recorded as this is a future event, no past event involved.

5.Assume that on 1 January 2009 the company issued $100,000 ten-year bonds with a 10% coupon rate paid semi-annually. The bond is issued to yield a 12% return to investors selling for $88,529. Which of the following would be part of the journal entries on 1 January 2009?

Select one:

a.Cr Discount on Bonds $11 471

b.Cr Premium on Bonds $11,471

c.None of the options.

d.Dr Premium on Bonds $11,471

e.Dr Discount on Bonds $11,471

6.The Framework states that a liability should be recognised when and only when:

1. The liability amount can be measured reliably.

2. It is a legal obligation by the entity.

3. It is probable that there will be an outflow of the future economic benefits.

4. An obligation arises from the acquisition of assets.

Select one:

a.1 and 3 only

b.1, 2, 3 and 4 only

c.1, 2 and 3 only

d.2 only

e.2 and 3 only

7.A liability should only be recognised in the financial statements when:

i.reserves have been set aside by the entity.

ii.the amount can be measured reliably.

iii.it is probable that the future sacrifice of economic benefits will be required.

Select one:

a.i, ii and iii

b.ii and iii only

c.i and iii only

d.i and ii only

e.None of the options

8.Edsel Ltdproduces and sells luxury sports cars.During the year ending 30 June 2019, Heatseeker Ltd had made and sold 12 cars. The cars come with a 7 year warranty that states that the company will repair and make good any defects in the car. Edsel Ltd has recognised a warranty provision of $150,000 for the financial year ending 30 June 2019. During the year ending 30 June 2019, Edsel Ltd received one car from a customer that had some defects. The customer received warranty repairs requiring $47,000 worth of parts that Edsel Ltd already had on hand, and $12,000 worth of labour. The journal entry to record the warranty work would be:

Select one:

a.Dr Provision for Warranty$59,000

Cr Parts Inventory$47,000

Cr Wages Payable$12,000

b.Dr Wages Expense$12,000

Dr Parts Expense$47,000

Cr Cash$59,000

c.Dr Provision for Warranty$59,000

Cr Inventory$59,000

d.Dr Warranty Expense$59,000

Cr Cash$59,000

e.Dr Wages Expense$12,000

Dr Warranty Expense$47,000

Cr Provision for Warranty$59,000

9.Which of the following isNOTa liability?

Select one:

a.Revenue received in advance

b.Reserves

c.Provision for warranty

d.Unpaid wages owed to employees

e.Accrued expenses

10.Assume that on 1 January 2009 the company issued $100,000 ten-year bonds with a 10% coupon rate paid semi-annually. The bond is issued to yield a 12% return to investors selling for $88,529. Which of the following would be part of the journal entries to record the sale of the bond on 1 January 2009?

Select one:

a.Dr Cash $88,529

b.Dr Cash $100,000

c.Dr Bonds $11,471

d.Dr Bonds $88,529

e.Dr Bonds $100,000