Year Hourly Wages Vacation Days Earned by Each Employee
Vacation Dayse Used by Each Employee
2006 $28.50 10 0
2007 $27.00 10 8
2008 $28.50 10 10
What is the amount of expense relative to compensated absences that
should be reported on Simson’s income statement for 2006?
47) A company buys an oil rig for $1,000,000 on January 1, 2007.
The life of the rig is 10 years and the expected cost to dismantle the
rig at the end of 10 years is $200,000 (present value at 10% is
$77,110). 10% is an appropriate interest rate for this company. What
expense should be recorded for 2007 as a result of these events?
48) A company offers a cash rebate of $1 on each $4 package of
batteries sold during 2007. Historically, 10% of customers mail in the
rebate form. During 2007, 6,000,000 packages of batteries are sold,
and 210,000 $1 rebates are mailed to customers. What is the rebate
expense and liability, respectively, shown on the 2007 financial
statements dated December 31?
49) A contingency can be accrued when
50) Which of the following sets of conditions would give rise to the
accrual of a contingency under current generally accepted accounting
principles?
51) Mark Ward is a farmer who owns land which borders on the rightof-way of the Northern Railroad. On August 10, 2007, due to the
admitted negligence of the Railroad, hay on the farm was set on fire
and burned. Ward had had a dispute with the Railroad for several
years concerning the ownership of a small parcel of land. The
representative of the Railroad has offered to assign any rights which
the Railroad may have in the land to Ward in exchange for a release
of his right to reimbursement for the loss he has sustained from the
fire. Ward appears inclined to accept the Railroad's offer. The
Railroad's 2007 financial statements should include the following
related to the incident:
52) An example of an item which is NOT a liability is
53) The covenants and other terms of the agreement between the
issuer of bonds and the lender are set forth in the