20 (3 points) Sierra Inc. manufacturers environmentally friendly appliances. It offers a two-year warranty standard. In Year 1, Sierra sold 450,000 toasters. Past experience has told Sierra that approximately 4 percent of the toasters require repair at an average cost of $10 each. During Year 1, Sierra actually spends $38,000 and during Year 2, Sierra actually spends $105,000. What is the balance in the warranty liability account at the end of year 2? $37,000 $38,000 $180,000 $143,000 Reporting contingent losses but not contingent gains is an example of which accounting principle? Cost/benefit Conservatism Matching Going concern Question 22 (3 points) Which of the following is not a criterion that must be met for an item to be classified as a liability? The sacrifice is from the entity's assets or services It is a certain future sacrifice It arises from a present obligation that results from a past transaction It is a probable future sacrifice Question 23 (3 points) Kitten Inc. issued $105,000 in bonds on September 1. The annual interest rate is 6 percent and interest is paid on the bonds every June 30 and December 31. When the bonds are issued on September 1, how much cash will the company collect? $103,950 $106,050 $1,050 $105,000 Which of the following is an agreement which debtors sign as part of getting a loan that serves to protect a creditor? Covenant Leverage Security Term bond Question 25 (3 points) Which of the following is not a reason companies borrow money? To raise needed funds Creditors have no control over the company Interest is tax deductible Creditors do not become owners in the company Question 26 (3 points) Which of the following refers to an asset a creditor could take from a debtor if the debtor fails to pay back a loan? Covenant Interest Maturity Security Question 27 (3 points) Krystal Corporation issued $100,000 with a 4 percent stated rate of interest on January 1. The effective rate of interest on that date was 6 percent and interest is paid semiannually on June 30 and December 31. The bonds mature ten years from now. What amount would bondholders be willing to pay Krystal on January 1 for the bonds? $100,000 $140,000 $85,280 $85,123