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Exam 9: Reporting and Analyzing Current Liabilities

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Question 91

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In order to be reported, liabilities must:

A) Be certain.
B) Sometimes be estimated.
C) Be for a specific known amount.
D) Always have a definite date for payment.
E) Involve an outflow of cash.

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Question 92

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Vacation benefits is an example of a known liability.

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Question 93

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A company has advance subscription sales totaling $45,000 for four quarterly journals that will mailed to customers in the upcoming year. When the company mails the first quarterly journal to customers, it should record:

A note payable can be used to extend the payment due on an account payable.

A high value for the times interest earned ratio means that a company is a lower risk borrower.

Sales taxes payable is debited and cash is credited when companies send sales taxes collected from customers to the government.

During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $1,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the estimated warranty expense for the month is:

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:

Promissory notes cannot be transferred from party to party because they are nonnegotiable.

Amounts received in advance from customers for future products or services:

The payroll record of a company provided the following data for the current weekly pay period ended March 12 for employee R. Gold. The Social Security portion of the FICA taxes is 6.2% on the first $118,500 per calendar year and the Medicare portion is 1.45% of all wages paid. The federal and state unemployment tax rates are 0.8% and 5.4%, respectively, on the first $7,000 paid to each employee. Calculate the net pay for R. Gold.

The more _______________________ allowances an employee claims, the less federal income tax the employer will deduct from pay.

Trade accounts payable are amounts owed to suppliers for products or services purchased on credit.

Describe contingent liabilities and how to account for and/or report them.

Hollow Company provides you with following information for two of its employees. The company is subject to the following taxes. Compute amounts for each of these four taxes as applied to each employee's gross earnings for November.

A bank that is authorized to accept deposits of amounts payable to the federal government is a:

On September 15, SkateWorld borrowed $70,000 cash from Mutual Bank by signing a 6%, 60-day note payable. a. Prepare SkateWorld's journal entry to record the issuance of the note payable. b. Prepare SkaetWorld's journal entry to record the payment of the note at maturity.

A contingent liability is a potential obligation that depends on a future event arising from a past transaction or event.

All of the following statements regarding long-term liabilities are true except?

The times interest earned ratio is calculated by dividing interest expense by income before interest expense and income taxes.