ACC 304 Week 9 Quiz – Strayer NEW
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Week 9 Quiz 5: Chapter 13,
Quiz 6: Chapter 14
CURRENT LIABILITIES AND CONTINGENCIES
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
1. A zero-interest-bearing
note payable that is issued at a discount will not result in any interest
expense being recognized.
2. Dividends
in arrears on cumulative preferred stock should be recorded as a current
liability.
3. Magazine
subscriptions and airline ticket sales both result in unearned revenues.
4. Discount
on Notes Payable is a contra account to Notes Payable on the balance sheet.
5. All
long-term debt maturing within the next year must be classified as a current
liability on the balance sheet.
6. A
short-term obligation can be excluded from current liabilities if the company
intends to refinance it on a long-term basis.
7. Many
companies do not segregate the sales tax collected and the amount of the sale
at the time of the sale.
8. A
company must accrue a liability for sick pay that accumulates but does not
vest.
9. Companies
report the amount of social security taxes withheld from employees as well as
the companies’ matching portion as current liabilities until they are remitted.
10. Accumulated
rights exist when an employer has an obligation to make payment to an employee
even after terminating his employment.
11. Companies
should recognize the expense and related liability for compensated absences in
the year earned by employees.
12. Companies
should accrue an estimated loss from a loss contingency if information
available prior to the issuance of financial statements indicates that it is
probable that a liability has been incurred.
13. A
company discloses gain contingencies in the notes only when a high probability
exists for realizing them.
14. The
expected profit from a sales type warranty that covers several years should all
be recognized in the period the warranty is sold.
15. The
fair value of an asset retirement obligation is recorded as both an increase to
the related asset and a liability.
16. The
cause for litigation must have occurred on or before the date of the financial
statements to report a liability in the financial statements.
17. Under
the expense warranty approach, companies charge warranty costs only to the
period in which they comply with the warranty.
18. Prepaid
insurance should be included in the numerator when computing the acid-test
(quick) ratio.
19. Paying a current liability with cash will
always reduce the current ratio.
20. Current
liabilities are usually recorded and reported in financial statements at their
full maturity value.
True False Answers—Conceptual
MULTIPLE CHOICE—Conceptual
21. Liabilities are
a. any accounts having credit balances after
closing entries are made.
b. deferred credits that are recognized and
measured in conformity with generally accepted accounting principles.
c. obligations to transfer ownership shares to
other entities in the future.
d. obligations
arising from past transactions and payable in assets or services in the future.
22. Which of the following is a current liability?
a. A long-term debt maturing currently, which is
to be paid with cash in a sinking fund
b. A long-term debt maturing currently, which is
to be retired with proceeds from a new debt issue
c. A long-term debt maturing currently, which is
to be converted into common stock
d. None of these
23. Which of the following is true about accounts payable?
1. Accounts payable should not be
reported at their present value.
2. When accounts payable are
recorded at the net amount, a Purchase Discounts account will be used.
3. When accounts payable are
recorded at the gross amount, a Purchase Discounts Lost account will be used.
a. 1
b. 2
c. 3
d. Both 2 and 3 are true.
24. Among the short-term obligations of Lance Company as of December
31, the balance sheet date, are notes payable totaling $250,000 with the
Madison National Bank. These are 90-day
notes, renewable for another 90-day period.
These notes should be classified on the balance sheet of Lance Company
as
a. current liabilities.
b. deferred charges.
c. long-term liabilities.
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