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Exam 9: Reporting and Interpreting Liabilities

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Question 61

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A current liability is always a short-term obligation expected to be paid within one year of the balance sheet date.

A) True
B) False

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Question 62

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the following four questions. A.What is a contingent liability? B.When must a contingent liability be recorded through a journal entry? C.When should a contingent liability be disclosed in the footnotes to the financial statements? D.When is disclosure of a contingent liability not required?

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A. A contingent liability is a potential...

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Question 63

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When a liability is initially recorded,it is recorded at the future amount of all payments.

A quick ratio that is high according to an industry average might mean the company may have excessive inventory levels or slow moving inventory items.

Which of the following accounts would not be considered when calculating the quick ratio?

Libby Company purchased equipment by paying $5,000 cash on the purchase date and agreeing to pay $5,000 every six months during the next four years; the first payment is due six months after the purchase date.Libby's incremental borrowing rate is 8%.At what amount would the equipment be reported at on the balance sheet as of the purchase date?

Rocket Corporation entered into the following transactions: The accrual of wages and salaries expense. The cash sale of equipment for a loss. The cash payment in advance for a one-year insurance policy. Which of the following statements is correct with respect to determining Rocket's cash flows from operating activities on the statement of cash flows?

You have been asked to compute the cash equivalent price of a machine assuming the cost (including principal and interest) is to be paid in two unequal payments after the acquisition date.Which of the following table values would be used to find the cost of the machine?

Rudy Corporation is looking to purchase a building costing $500,000 by paying $100,000 cash on the purchase date,and agreeing to make annual payments for the next ten years; the first payment is due one year after the purchase date.Rudy's incremental borrowing rate is 10%.How much will each of the annual payments be?

Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten years beginning one-year from the purchase date.Short's incremental borrowing rate is 10%.At what amount would the land be reported at on the balance sheet?

For the present value of a single amount,the compounding period may only be once a year.

The choice of inventory method has an impact on the accounts payable turnover ratio.

A company's 2010 income tax return reported a $75,000 tax liability.During 2010,the deferred income tax liability account increased $9,000.Which of the following statements is correct?

Landseeker's Restaurants reported cost of goods sold of $322 million and accounts payable of $83 million for 2011.In 2010,cost of goods sold was $258 million and accounts payable was $72 million.What was Landseeker's accounts payable turnover ratio in 2011?

The journal entry to record a contingent liability creates an accrued liability on the balance sheet and a loss on the income statement.

Smith Corporation entered into the following transactions: Purchased inventory on account. Collected an account receivable. Purchased equipment using cash. Which of the above transactions resulted in an increase in working capital?

Which of the following is incorrect?