Accounting Chpt 8

The feature that distinguishes loss ___________________ from other liabilities is the uncertain outcome.

contingencies

A transaction or event in which the outcome is uncertain is referred to as a(n) _________________________.

contingency

A(n) ______________________ liability is an existing uncertain situation that might result in a loss depending on the outcome of a future event.

contingent

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

contingent gain

Notes payable is classified as a liability that has which of the following effects? a. creates an asset on the balance sheet b. creates deferred revenue on the income statement c. creates revenue on the income statement d. creates interest expense on the income statement.

creates interest expense on the income statement.

Deferred revenues and sales tax payable typically are reported as ________________ liabilities.

current

A(n) _________________ payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash.

accounts

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 a(n)... a. notes receivable. b. accounts receivable. c. accounts payable. d. notes payable.

accounts payable

Which of the following must employers by law withhold from their employees' pay? a. unemployment taxes b. health insurance contributions c. federal income taxes d. contributions toward retirement funds.

federal income taxes

What will be the effect of paying off an accounts payable balance on the current and the acid-test ratios? Assume that both ratios are greater than 1. a. acid-test ratio will increase b. current ratio will increase c. current ration will remain unchanged d. current ratios will decrease e. acid-test ratio will remain unchanged. f. acid-test ratio will decrease

Acid-test ratio will increase, current ratio will increase

Which of the following are NOT required payroll whitholdings? a. federal unemployment tax (FUTA) b. charitable contributions c. state unemployment tax (SUTA) d. federal income tax social security e. medicare taxes

FUTA, Charitable contributions, SUTA

Which of these payroll taxes are paid ONLY by the employer? a. Medicare b. Social Security. c. FUTA d. SUTA

FUTA, SUTA

A probable future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of past transactions or events in a(n)...

liability

_________________ refers to a company's cash position and overall ability to obtain cash in the normal course of business.

Liquidity

What are the two classifications for liabilities?

Long-term, current

Payroll withholdings ________________. (Select all that apply. a. increase the amount of cash an employee receives b. decrease the amount of cash an employee receives. c. are amounts subtracted from employees' gross earnings to determine their net pay d. are amounts added to employees' gross earnings to determine their net pay. e. are voluntary

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

Issuing a note payable for cash results in a(n)_________. a. decrease in assets and an increase in liabilities. b. increase in assets and an increase in liabilities. c. increase in liabilities and a decrease in stockholders' equity. d. decrease in assets and a decrease in liabilities.

b. increase in assets and in increase in liabilities.

Liabilities are classified as... a. revenues and expenses. b. operating and nonoperating. c. current and long-term d. operating and investing.

current and long-term

Common current liabilities include: a. prepaid insurance b. deferred revenues c. the current portion of long-term debt d. notes payable due in two years e. sales tax payable

deferred revenues, the current portion of long-term debt, sales tax payable

A contingent liability is recorded if which conditions are met? a. there is a remote chance that a future loss will occur. b. it is probable that a future loss will occur. c. the amount of the loss can be reasonably estimated.

it is probable that a future loss will occur, the amount of the loss can by reasonably estimated.

Identify a primary reason why financial statement users assess a comapny's liquidity. a. lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful. b. lack of liquidity leads to low asset turnover ratios. c. liquidity represents the most important indicator of profitability.

lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful.

The term referring to a company having sufficient amount of cash to pay its current debts is... a. liquidity b. consistency c. security d. solvency

liquidity

The flipside of a contingent gain is a contingent... a. reserve. b. asset. c. loss.

loss

Amounts that are subtracted from an employee's gross pay are referred to as...

payroll withholdings

A loss that is judged to be probable and for which the amount is reasonably estimable should be...? a. ignored b. recorded c. deferred until related uncertainly is resolved d. disclosed only in the notes

recorded

Which of these payroll taxes are paid by the employer and the employee? a. social security b. medicare c. FUTA d. SUTA

social security, medicare

What are the two criteria used to determine whether a contingent liability is reported in the financial statements? a. the percentage of the payment to total income b. the ability to estimate the amount of payment c. the payment date d. the likelihood of payment

the ability to estimate the amount of payment, the likelihood of payment

Poppy Corporation has a current ratio of 2.0 and a quick ratio of 1.6. Poppy purchases additional inventory for cash. Which of the following occurs? a. working capital decreases b. the current ratio will decrease. c. the quick ratio will increase d. the current ratio will remain the same.

the current ratio will remain the same

Payroll withholdings are... a. the employer's portion of taxes paid for social security and Medicare. b. the items subtracted from an employee's gross pay to arrive at take-home pay. c. the payments submitted for both the employee and employer to the government for taxes.

the items subtracted from an employee's gross pay to arrive at take-home pay.

Which of the following is an important criteria used to determine the reporting of a contingent liability? a. the effect on key balance sheet ratios b. the classification of the related expense or loss c. the potential effect on financial statement users. d. the likelihood of future payment or loss

the likelihood of future payment or loss

A contingent liability is an existing _____________ situation that might result in a loss depending on the outcome of a future event.

uncertain/undecided

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) ________________.

warranty

Which of the following is a guarantee that protects a customer from product defects for a specified period of time? a. sales allowance b. contingency c. warranty d. promissory note

warranty

Taxes subtracted from employees' pay and remitted to the government on their behalf are called... a. employer payroll taxes. b. retirement contribution taxes c. withholding taxes. d. remittance payment taxes.

withholding taxes.