F5 M1 Payables & Accrued Liabilities

Question 1

When given the total sales (including sales tax) and that sales tax is 6%. How do you calculate the sales without the sales tax?

Answer 1

Total sales / (1+.06)

Question 2

Do accounts payable involve:
Period payment of interest
Secured by collateral
Both
Neither

Answer 2

Neither

Question 3

Long-term debt that matures within one year should be classified as a _____.

Answer 3

Current liability

Unless retirement is to be accomplished with other than current assets.

Question 4

Under IFRS, and asset retirement obligation is called a ____ and it is initially measured at ____.

Answer 4

Decommissioning liability

Measured at best estimate

Question 5

What is accretion expense?

Answer 5

The “interest expense” every year in ARO

It is the growth of the liability over time so that the liability is satisfied

Question 6

What does ARO stand for?

What kind of account is ARO?

Answer 6

Asset retirement obligation

Liability account

Question 7

What does ARC stand for?

Answer 7

Asset retirement cost

Question 8

Journal Entry: Record the asset retirement obligation

Answer 8

Dr Asset Retirement Cost (ARC) at Present Value

Cr: Asset Retirement Obligation (ARO) at Present Value

Question 9

Journal Entry: Record the accretion expense and depreciation expense related to the ARO on an annual basis

Answer 9

Dr Accretion Expense
Cr Asset Retirement Obligation
Dr Depreciation Expense
Cr Accumulated Depreciation

Question 10

How do you calculate the accretion expense?

Answer 10

Accretion rate x the beginning ARO for that period
* The accretion rate is also the risk-adjusted rate
Each year the liability increases so your beginning ARO changes

Question 11

Dividends should only be included as a current liability if the declaration of dividends are ____.

Answer 11

This year

Question 12

What is the equation for calculating note payable interest liability? (the interest is annual)

Answer 12

Remaining note payable x interest rate = annual interest due

Annual interest due x number of months accrued = liability

Question 13

Liability reporting criteria for post-employment benefits: Employees’ compensation for future absences should be accrued if these 4 criteria are met:

Answer 13

1. Service have already been rendered
2. The obligation relates to vest or accumulated rights
3. The amount can be reasonably estimated
4. The payment is probable