QUESTION 1

Cunningham, a branch manager, is allowed a bonus of 10% of income after bonus and tax. If the tax rate is 30% and income before bonus and tax is $200,000, what is Mr. Cunninghams bonus?

$13,084

$14,000

$14,433

$20,000

QUESTION 2

Which is not a characteristic of a liability?

There will be a probable future transfer or use of assets.

There is little or no discretion to avoid the future sacrifice.

The obligating transaction or event must have already happened.

A legally enforceable claim must be present.

QUESTION 3

The Park Company is affected by the following contingencies at the end of 2014:

1. Expropriation of Parks foreign assets, valued at $3,000,000, appears reasonably possible.

2. Parks' legal counsel has concluded that it is probable that the company will be required to pay damages of $500,000 in a lawsuit.

3. It appears remotely possible that a major customer will be unable to repay Parks on a note receivable for $100,000.

4. Parks' controller estimates that $250,000 of the company's pledged receivables are likely to be uncollectible, and the lender will require Parks to honor the amounts.

What total amount should Parks accrue for loss contingencies in 2014?

$ 750,000

$ 850,000

$3,500,000

$3,850,000

QUESTION 4

The Salty Chip Company includes one coupon having no expiration date with its deluxe snack pack. Upon return of 10 coupons, Salty Chip will send a silver chip clip, which costs Salty Chip $1.50 each. Past experience indicates that 30% of coupons issued will be redeemed. Salty Chip began this promotion in 2013 and sold 1,000,000 deluxe snack packs. During 2013, 90,000 coupons were received and 9,000 chip clips were distributed to customers. The December 31, 2013 balance sheet should include a liability for coupons outstanding of

$ 18,000

$180,000

$ 31,500

$ 50,000

QUESTION 5

Existing claims related to product warranties and litigation as of December 31, 2014, indicate that it is probable that a liability has been incurred. However, as of December 31, 2014, the exact amount of the obligation cannot be reasonably estimated, but a range of possible amounts has been determined. Based on these facts, an estimated loss contingency should be

accrued

disclosed but not accrued

neither accrued nor disclosed

classified as an appropriation of retained earnings

Question

QUESTION 1

Cunningham, a branch manager, is allowed a bonus of 10% of income after bonus and tax. If the tax rate is 30% and income before bonus and tax is $200,000, what is Mr. Cunninghams bonus?

		$13,084
		$14,000
		$14,433
		$20,000

QUESTION 2

Which is not a characteristic of a liability?

		There will be a probable future transfer or use of assets.
		There is little or no discretion to avoid the future sacrifice.
		The obligating transaction or event must have already happened.
		A legally enforceable claim must be present.

QUESTION 3

The Park Company is affected by the following contingencies at the end of 2014:

1.	Expropriation of Parks foreign assets, valued at $3,000,000, appears reasonably possible.
2.	Parks' legal counsel has concluded that it is probable that the company will be required to pay damages of $500,000 in a lawsuit.
3.	It appears remotely possible that a major customer will be unable to repay Parks on a note receivable for $100,000.
4.	Parks' controller estimates that $250,000 of the company's pledged receivables are likely to be uncollectible, and the lender will require Parks to honor the amounts.

What total amount should Parks accrue for loss contingencies in 2014?

		$ 750,000
		$ 850,000
		$3,500,000
		$3,850,000

QUESTION 4

The Salty Chip Company includes one coupon having no expiration date with its deluxe snack pack. Upon return of 10 coupons, Salty Chip will send a silver chip clip, which costs Salty Chip $1.50 each. Past experience indicates that 30% of coupons issued will be redeemed. Salty Chip began this promotion in 2013 and sold 1,000,000 deluxe snack packs. During 2013, 90,000 coupons were received and 9,000 chip clips were distributed to customers. The December 31, 2013 balance sheet should include a liability for coupons outstanding of

		$ 18,000
		$180,000
		$ 31,500
		$ 50,000

QUESTION 5

Existing claims related to product warranties and litigation as of December 31, 2014, indicate that it is probable that a liability has been incurred. However, as of December 31, 2014, the exact amount of the obligation cannot be reasonably estimated, but a range of possible amounts has been determined. Based on these facts, an estimated loss contingency should be