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Questions –
Q1. You purchase a new cell phone. It comes with a 6-month warranty. This warranty states: We guarantee that if this product fails to operate properly within six months year of purchase we will replace it free of charge ($0). What type of liability and classification should be recorded by the manufacturer to reflect this potential obligation?
a. Long-term Notes Payable / Non-Current Liabilities
b. Accounts Payable / Current Liabilities
c. Contingent Liabilities / Current Liabilities
d. Accrued liability / Current Liabilities
e. Contingent Liabilities / Non-Current Liabilities
Q2. Samantha Company reported the following items on its financial statement for the year ending December 31, 20X1. This is the first year of operations.
Sales $865,000
Cost of Goods Sold $515,000
Salary Expense 45,000
Interest Expense 35,000
Dividends 25,000
Income Tax Expense 60,000
What is the Net Income reported for the period ending Dec. 31, 20X1?
a. $270,000
b. $305,000
c. $185,000
d. $350,000
e. $210,000