Chapter 9: Quiz

On December 1, Victoria Company signed a 90-day, 8% note payable, with a face value of $9,000. What amount of interest expense is accrued at December 31 on the note?

$60

The times interest earned ratio reflects:

A company's ability to pay interest

Times interest earned is calculated by:

Dividing income before interest expense and income taxes by interest expense.

T/F: Current liabilities are liabilities not due within one year (or the company's operating cycle if longer)

False

T/F: The amount of FICA tax that employers must pay is one third of the amount of the FICA taxes withheld from their employees

False

When a note comes due, the difference between the amount borrowed and the amount repaid is:

Interest

A short term note payable:

Is a written promise to pay a specified amount on a stated future date within one year.

T/F: A contingent liability is a potential obligation that depends on a future event arising from a past transaction or event

True

T/F: A known obligation of an uncertain amount that can be reasonably estimated is reported as an estimated liability

True

T/F: Accounts payable, or trade accounts payable, are amounts owed to suppliers for products or service purchases on credit

True