Question 1

The following selected transactions relate to liabilities of Food Emporium whose fiscal year ends on December 31.
Jan.26 Negotiated a line of credit with City Bank that can be renewed annually upon bank approval.The amount available under the line of credit is $1 million at the bank's prime rate.
March 1 Arranged a six-month bank loan of $400,000 with City Bank under the line of credit agreement.Interest at the prime rate of 8% is payable at maturity.
September 1 Paid the 8% note at maturity.
Record the appropriate entries,if any,on January 26,March 1,and September 1.

Accepted Answer

The answer of The following selected transactions relate to liabilities...

Question 2

Listed below are several terms and phrases associated with current liabilities.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

Accepted Answer

i;a;h;g;d;...

Question 3

Companies selling products subject to sales taxes are responsible for collecting the sales tax directly from customers and periodically remitting the sales taxes collected to the state and local governments.

Accepted Answer

A) True 
 B)False

Question 4

Suppose you buy dinner for $23.75 that includes an 8% sales tax.How much did the restaurant charge you for the dinner (excluding any tax) and how much do they owe for sales tax?

Accepted Answer

A)  $23.75 for dinner and $1.90 for sales tax.
B)  $23.75 for dinner and no sales tax.
C)  $21.85 for dinner and $1.90 for sales tax.
D)  $21.99 for dinner and $1.76 for sales tax.E) A) and B)
F) A) and C)

Question 5

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour.Federal income taxes are withheld at 15% and state income taxes at 6%.FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee.What is the actual direct deposit of payroll for the first week of January?

Accepted Answer

A)  $5,404.
B)  $5,708.
C)  $4,792.
D)  $8,000.E) A) and B)
F) A) and C)

Question 6

Which of the following statements regarding liquidity ratios is false?

Accepted Answer

A)  A high current ratio generally indicates the ability to pay current liabilities on a timely basis.
B)  A high acid-test ratio generally indicates the ability to pay current liabilities on a timely basis.
C)  All current assets are due within one year and therefore have essentially equal liquidity.
D)  As a rule of thumb,a current ratio of 1 or higher often reflects an acceptable level of liquidity.E) A) and B)
F) All of the above

Question 7

When a company borrows cash from a bank promising to repay the amount borrowed plus interest,the borrower reports its liability as notes payable.

Accepted Answer

A) True 
 B)False

Question 8

The journal entry to record a contingent liability requires a debit to a loss (or expense)account and a credit to a liability.

Accepted Answer

A) True 
 B)False

Question 9

If management can estimate the amount of loss that will occur due to litigation against the company,and the likelihood of the loss is probable,a contingent liability should be

Accepted Answer

A)  Disclosed,but not reported as a liability.
B)  Disclosed and reported as a liability.
C)  Neither disclosed nor reported as a liability.
D)  Reported as a liability,but not disclosed.E) B) and D)
F) A) and D)

Question 10

Which of the following are not included in an employer's payroll tax expense?

Accepted Answer

A)  Employer portion of FICA taxes.
B)  Federal unemployment taxes.
C)  State unemployment taxes.
D)  State income taxes.E) B) and C)
F) A) and B)

Question 11

Universal Travel,Inc.borrowed $500,000 on November 1,2015,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2016.In connection with this note,Universal Travel,Inc.should record interest expense in 2016 in the amount of:

Accepted Answer

A)  $8,000.
B)  $30,000.
C)  $5,000.
D)  $25,000.E) B) and C)
F) C) and D)

Question 12

Which of the following is not a reason why a company might prefer to report a liability as long-term rather than current?

Accepted Answer

A)  It may cause the firm to appear less risky to investors and creditors.
B)  It may increase interest rates on borrowing.
C)  It may cause the company to appear more stable commanding a higher stock price for new stock listings.
D)  It may reduce interest rates on borrowing.E) B) and C)
F) A) and C)

Question 13

We record interest expense in the period in which we pay it,rather than in the period we incur it.

Accepted Answer

A) True 
 B)False

Question 14

Away Travel filed suit against West Coast Travel seeking damages for copyright violations.West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000,with all amounts in the range considered equally likely.How should West Coast Travel report this litigation?

Accepted Answer

A)  As a liability for $100,000 with disclosure of the range.
B)  As a liability for $150,000 with disclosure of the range.
C)  As a liability for $200,000 with disclosure of the range.
D)  As a disclosure only.No liability is reported.E) B) and C)
F) C) and D)

Exam 8: Current Liabilities

Listed below are several terms and phrases associated with current liabilities.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

Correct Answer
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i;a;h;g;d;...
View Answer

Which of the following is not a reason why a company might prefer to report a liability as long-term rather than current?

Correct Answer
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Which of the following are not included in an employer's payroll tax expense?

Correct Answer
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Correct Answer
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We record interest expense in the period in which we pay it,rather than in the period we incur it.

Correct Answer
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Suppose you buy dinner for $23.75 that includes an 8% sales tax.How much did the restaurant charge you for the dinner (excluding any tax) and how much do they owe for sales tax?

Correct Answer
verified

Correct Answer
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If management can estimate the amount of loss that will occur due to litigation against the company,and the likelihood of the loss is probable,a contingent liability should be

Correct Answer
verified

Which of the following statements regarding liquidity ratios is false?

Correct Answer
verified

When a company borrows cash from a bank promising to repay the amount borrowed plus interest,the borrower reports its liability as notes payable.

Correct Answer
verified

Correct Answer
verified

The journal entry to record a contingent liability requires a debit to a loss (or expense)account and a credit to a liability.

Correct Answer
verified

Universal Travel,Inc.borrowed $500,000 on November 1,2015,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2016.In connection with this note,Universal Travel,Inc.should record interest expense in 2016 in the amount of:

Correct Answer
verified

Companies selling products subject to sales taxes are responsible for collecting the sales tax directly from customers and periodically remitting the sales taxes collected to the state and local governments.

Correct Answer
verified

Exam 8: Current Liabilities

Listed below are several terms and phrases associated with current liabilities.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

Correct Answerverifiedi;a;h;g;d;...View AnswerShow Answer

Which of the following is not a reason why a company might prefer to report a liability as long-term rather than current?

Correct AnswerverifiedShow Answer

Which of the following are not included in an employer's payroll tax expense?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

We record interest expense in the period in which we pay it,rather than in the period we incur it.

Correct AnswerverifiedShow Answer

Suppose you buy dinner for $23.75 that includes an 8% sales tax.How much did the restaurant charge you for the dinner (excluding any tax) and how much do they owe for sales tax?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If management can estimate the amount of loss that will occur due to litigation against the company,and the likelihood of the loss is probable,a contingent liability should be

Correct AnswerverifiedShow Answer

Which of the following statements regarding liquidity ratios is false?

Correct AnswerverifiedShow Answer

When a company borrows cash from a bank promising to repay the amount borrowed plus interest,the borrower reports its liability as notes payable.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The journal entry to record a contingent liability requires a debit to a loss (or expense)account and a credit to a liability.

Correct AnswerverifiedShow Answer

Universal Travel,Inc.borrowed $500,000 on November 1,2015,and signed a twelve-month note bearing interest at 6%.Principal and interest are payable in full at maturity on October 31,2016.In connection with this note,Universal Travel,Inc.should record interest expense in 2016 in the amount of:

Correct AnswerverifiedShow Answer

Companies selling products subject to sales taxes are responsible for collecting the sales tax directly from customers and periodically remitting the sales taxes collected to the state and local governments.

Correct AnswerverifiedShow Answer

Correct Answer
verified
i;a;h;g;d;...
View Answer

Correct Answer
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Correct Answer
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