solution to cost mgt ch13

CHAPTER 13

NON-FINANCIAL AND Current liabilitieS

SOLUTIONS TO EXERCISES

EXERCISE 13-1 (10-15 minutes)

(a) Classifications on balance sheet prepared under ASPE:
1.
Current liability; financial liability.
2.
Current asset.
3.
Current liability or long-term liability depending on term of warranty; not a financial liability.
4.
Current liability; financial liability. A company would have an obligation to pay cash to the bank for any overdraft and this would result from the contractual agreement with the bank.
5.
Current liability; not a financial liability if this refers to income tax withholdings, CPP and EI. This is a financial liability if it refers to other withholdings of a contractual nature with employees (union dues, for example).
6.
Current liability; financial liability.
7.
Current or noncurrent liability depending upon the time involved; not a financial liability (if deposit will be returned then it would be a financial liability).
8.
Current liability; not a financial liability.
9.
Current liability; not a financial liability.
10.
Current liability; not a financial liability.
11.
Current liability; financial liability.
12.
Note disclosure if assume not reasonably estimable and/or likelihood of confirming future event cannot be determined. If assume likely and reasonably estimable then current or noncurrent liability depending upon the time involved; not a financial liability. A personal injury suit that requires you to pay is a result of a court order, not a contract – either written or implied – between two parties.
13.
Current liability; financial liability.
14.
Current liability; financial liability.

EXERCISE 13-1 (Continued)

15.
Note disclosure; not a financial liability. Dividends in arrears have not been booked – so it cannot be a financial liability. It becomes a financial liability only when declared by the company. The contractual arrangement between a company and its preferred shareholders is that