Financial Accounting Ch. 8

Which of the following is not a characteristic of a liability?

It must be payable in cash.

Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should First State Bank record?

Debit Notes Receivable, $5,000; Credit Cash, $5,000.

When a product or service is delivered to a customer that previously paid in advance, the delivery is recorded as:

A debit to a liability and a credit to a revenue account.

Which of the following is not a current liability?

An unused line of credit.

Which of the following is reported as a current liability?

Current portion of long-term debt.

Which of the following increases an employer's payroll costs?

Employer's FICA contribution.

Which of the following is paid by both the employee and the employer?

FICA taxes.

Federal and state income taxes withheld by employers from their employees' payroll are initially recorded with a credit to a(n):

Liability.

A contingent liability that is probable and can be reasonably estimated must be

Recorded.

Which of the following is true in comparing the current ratio with the acid-test ratio?

The current ratio will always be at least as large as the acid-test ratio.

Interest expense is recorded in the period in which:

The interest is incurred.