1. Which of the following is not normally a current liability?
a. Accounts payable
b. Bonds payable
c. Interest payable
d. Income taxes payable
2. 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?
a. $180,000
b. $143,000
c. $38,000
d. $37,000
3.
Reporting contingent losses but not contingent gains is an example of which accounting principle?
a. Matching
b. Conservatism
c. Going concern
d. Cost/benefit
4. Watkins Inc. has the following assets:
Cash $400
Inventory $730
Prepaid Rent $460
Equipment $4,000
It has the following liabilities
Accounts Payable $560
Unearned revenue $200
Long-term Note Payable $3,500
What is Watkins’ current ratio?
a. 1.31
b. 1.49
c. 2.09
d. 1.14