Accounting: Chapter 8
Long−term liabilities are mostly for
financing activities.
The FASB provides guidelines to account for contingent liabilities by:
journal entries and footnote disclosures.
All of the following are reported as current liabilities EXCEPT:
unearned revenues for services to be provided in 16 months.
A typical credit period for payment is:
30 days
Potential liabilities that depend on future events arising out of past events are called:
contingent liabilities
How do you compute the purchases from suppliers
Cost of goods sold + ending inventory − beginning inventory
f the accounts payable turnover is 5.5, what is the days' payable outstanding? (Round your answer to the nearest day.)
66 days
A current liability would include all EXCEPT:
Interest Expense
Which account would be reported on the income statement:
Interest Expense
The journal entry to record accrued interest on a short−term note payable includes a debit to:
Interest Expense and a credit to Interest Payable.
According to FASB, when should a company journalize a contingent liability?
Journalize the contingent liability if it is probable that the loss will occur, and the amount of the loss can be reasonably estimated.
The principle of representational faithfulness requires that companies
Journalize the contingent liability if it is probable that the loss will occur, and the amount of the loss can be reasonably estimated.
Which of the following liability accounts is usually NOT an accrued liability:
Notes Payable
The journal entry to accrue salaries earned by employees will debit:
Salary Expense for gross pay, credit FICA Tax Payable, credit Employee Income Tax Payable and credit Salary Payable for net pay.
Employers must match employee contributions (up to a maximum amount) for:
Social security and medicare
Which account is NOT an example of an accrued liability?
accounts payable
Which is NOT an example of long−term debt:
accounts payable
The most frequently used current liabilities are
accounts payable, notes payable, and accrued liabilities
Notes payable due in six months are reported as:
current liabilities on the balance sheet
Unearned Service Revenue relating to services to be provided in one month, is reported on the balance sheet as:
current liability
To disclose a contingent liability means
disclose and make a journal entry.
To accrue a contingent liability means to:
make an adjusting journal entry
A company has a pending lawsuit that has a remote possibility of being settled in favor of the plaintiff who is a former employee. What should the company do?
nothing
Which is NOT a current liability:
service revenue
FICA tax includes:
social security and medicare
