Accounting Chapter 8

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)

accounts payable.

Payroll withholdings

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

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

contingencies

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

contingent

Which of the following are not required to be deducted from an employee's paycheck?

Charitable contributions Federal unemployment tax (FUTA) State unemployment tax (SUTA)

Notes payable is classified as a liability that has which of the following effects?

Creates interest expense on the income statement

_____________is 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.

Liability

payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash. (Enter only one word.

accounts

Deferred revenues and sales tax payable typically are reported as ______________liabilities.

current

Mathematically, the current ratio is expressed as current assets divided by

current liabilities

Liabilities that are payable within one year commonly are classified as__________ liabilities, while those payable more than one year from now commonly are classified as __________liabilities.

current long-term

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 is a(n)

liability.

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

liquidity.

The flipside of a contingent gain is a contingent

loss

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

uncertain

Obtaining a note payable for cash results in a(n)

increase in assets and an increase in liabilities

Common current liabilities include:

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

Which of the following would be the best current ratio, assuming the company had excellent liquidity and an ability to generate positive income?

2.4

refers to a company's cash position and overall ability to obtain cash in the normal course of business. (Enter one word per blank)

Liquidity

The feature that distinguishes loss_______________ from other liabilities is the uncertain outcome. (Enter one word per blank)

contingent