Carpenter Inc. estimates warranty expense at 2% of sales. Sales during the year were $4 million and warranty expenditures were $44,000. What was the balance in the Warranty Liability account at the end of the year?
A) $44,000.
B) $80,000.
C) $36,000.
D) $480,000.
Answer: C
Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?
A) The current ratio will always be equal to or larger than the acid-test ratio for a specific company.
B) The acid-test ratio will always be equal to or larger than the current ratio for a specific company.
C) Either the current ratio or the acid-test ratio could be larger for a specific company.
D) One ratio will always exceed 1.0, while the other will always be less than 1.0.
Answer: A
Note disclosure is required for material potential losses when the loss is at least reasonably possible:
A) Only if the amount is known.
B) Only if the amount is known or reasonably estimable.
C) Unless the amount is not reasonably estimable.
D) Even if the amount is not reasonably estimable.
Answer: D
