ACC 210 CH 8 Practice Questions

loss

The flipside of a contingent gain is a contingent

Contingent Gain

A(n) ______________ ____________ is an existing uncertainty that might result in a gain

debit payroll expense 100,000 credit fica payable 5,000 credit wages payable 73000

Jenco Company's gross pay for employees at the end of the pay period is $100,000. Jenco withholds the following amounts: federal withholding tax 20000 fica withholding-employee portion - 5000 health insurance premiums 2000

False

True or False: Current liabilities are always payable within one year

the ability to estimate the amount of the loss and the likelihood of the loss

What are the two criteria used to determine whether a contingent liability is reported in the financial statements?

Probable

When a contingent event that may give rise to a future loss is likely to occur, it is said to be _____

a) The future sacrifice arises from a present obligation. b) A future sacrifice of an economic benefit is probable. c) The obligation results from a past event.

Which of the following are essential characteristics of a liability?

Current Investments, Cash, Accounts Receivable

Which of the following are items included in the numerator of the quick ratio?

Prepaid assets and Inventory

Which of the following items are included in the numerator for the current ratio but are excluded from the numerator of the quick or acid-test ratio?

Current Ratio, Working Capital, and Acid-Test Ratio

Which of the following measures liquidity?

Notes payable due in 3 years

Which of the following obligations is NOT commonly classified as a current liability?

FICA and Unemployment Taxes

Which of the following payroll-related taxes must the employer pay by law?

Social Security and Medicare

Which of these payroll taxes are paid by the employer and the employee?

social security and medicare

Which of these payroll taxes are paid by the employer and the employee?

FUTA and SUTA

Which of these payroll taxes are paid by the employer and the employer?

Long-Term Liability

normally payable more than one year from now

Current Liability

normally payable within one year

Asset

probable future benefit

Employee

state and federal income tax

Employer

state and federal unemployment tax

Payroll Withholding

the items subtracted from an employee's gross pay to arrive at net pay

increase in assets and an increase in liabilities.

Issuing a note payable for cash results in a(n):

decrease

If a liability is classified as current, rather than noncurrent, the company's working capital will _______

Common Current Liabilities

Sales tax payable The current portion of long-term debt Deferred revenues

Warranty

Sally Company manufactures large kitchen appliances. For the first year of purchase, the company will repair any manufacturing defect free of charge, Sally apparently sells its appliances with a(n)

warranties

For manufacturer, the most commonly reported contingent liabilities relate to product:

Face amount x annual interest rate x fraction of the year

Choose the correct formula for calculating interest:

Accounts Payable, Taxes Payable, Deferred Revenues

Which of the following are current liabilities? -accounts payable -long-term debt -taxes payable -deferred revenues

Number of exemptions claimed and amounts earned by employees

Withholding taxes for federal and state income tax are based upon which items:

Liabilities

a probable future sacrifice of economic benefits arising from present obligations to transfer assets or provide services as a result of past transactions or events

Contributions to retirement and other savings accounts, reduced or no-cost company-provided services, payment of insurance premiums on employees behalf

What are examples of fringe benefits provided by employers to their employees?

accrued

A loss that judged to be probable and for which the amount is reasonably estimable should be:

Current Ratio Formula

Current Assets / Current Liabilities

Working Capital

Current assets minus current liabilities equals:

Debit to Cash $100,000 Credit to Note Payable $100,000

On November 1, 2018, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, 2019. The journal entry on November 1, 2018 would include which of the following?

Contingent Liability

an existing uncertain situation that might result in a loss depending on the outcome of a future event

Liability

future sacrifice

Current and long-term

Liabilities are classified as

next

The current portion of long-term debt is the amount that will be paid within the ____ year.

Payroll Withholdings

are amounts subtracted from employees' gross earnings to determine their net pay and decrease the amount of cash an employee receives

Accounts Payable

A company purchases inventory or supplies and promises to pay within 30 to 45 days. No formal agreement is signed. This transaction is recorded as

Quick

Another name for the acid-test ratio is the _____ ratio

liability

Deferred revenue should be classified as a(n) __________ on the balance sheet

an entire year

Schmidt Company borrows $10,000 from its bank and signs a 6-month note. Interest, which is due quarterly, is specified in the note as 6%. The Interest rate stated in the loan agreement most likely applies to?

$250,000

Spencer Corp.'s attorney estimates that the company will ultimately have to pay between $250,000 and $500,000 relating to current litigation. Spencer should accrue a contingent liability and loss of

current liabilities

Taxes collected for taxing authorities are recognized as:

chance

The feature that distinguishes loss contingencies from other liabilities is the _________ that a loss will occur

Acid-Test Ratio

The ratio that is a more conservative measure than the current ratio of a company's ability to pay its current liabilities is the:

Liquidity

The term referring to a company having a sufficient amount of cash to pay its current debts:

debit warranty expense $4,000; credit warranty liability $4,000

Wang corporation sells $200,000 goods on account to customers. wang estimates that warranties will be 2% of sales. at the end of the year, wang will require which of the following entries for warranties?