chapter 8 smart book

amounts that are subtracted from an employees gross pay are referred to as

payroll withholdings

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 then 1

-acid test ratio will increase -current ratio will increase

payroll withholdings _______

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

which of the following may be classified as contingent liabilities

-frequent flyer program awards -future litigation losses - product warranties

obtaining a note payable for cash results in a

-increase in assets and an increase in liabilities -cash debit -notes payable credit

a contingent liability is recorded if which conditions are met

-it is probable that a future loss will occur -the amount of the loss can be reasonably estimated

what are the two criteria used to determine whether a contingent liability is reported in the financial statements

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

which of the following tents to be the source of the most commonly reported contingent liability

-warranties

which of the following is a guarantee that protects a customer form product defects for a specified period of time

-warranty

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 will occur

the current ratio will remain the same

a ______ payable is a short term liability that occurs when a company purchases goods and does not immediately pay with cash

- account payable

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 an

-Accounts payable

which of these payroll taxes are paid only by the employer

-SUTA -FUTA

notes payable is classifies as a liability that has which of the following effects

-creates interest expense on the income statement

true or false an employer pays federal unemployment tax as a percentage of an employees total pay for the year

-false

which of the following must employers by law withhold from their employees pay

-federal income taxes

which of the following payroll related taxes must the employer pay by law

-federal insurance contributions act amounts -unemployment tax

which of the following are not required to be deducted from an employees paycheck

-federal unemployment tax (FUTA) -charitable contributions -state unemployment tax (SUTA)

by law an employer us required to pay which of the following amounts as payroll taxes

-federal unemployment tax (FUTA) -medicare contributions -social security contributions

what are two classifications for liabilities

-long term -current

which of these payroll taxes are paid by the employer and the employee

-medicare -social security

withholding taxes for federal and state income tax are based upon which items

-number of exemptions claimed -amounts earned by employees

common current liabilities include

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

which of the following is an important criteria used to determine the reporting of a contingent liability

-the likelihood of future payment or loss

the feature that distinguishes loss _____ from other liabilities is the uncertain outcome

contingencies

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

liability

a loss that is judged to be probable and for which the amount is reasonably estimable should be

recorded

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

liquidity

a ______ gain is an existing uncertainty that might result in a gain

contingent gain

product warranties effects of environmental problems and lawsuits are examples of transactions or events that give rise to

contingent liabilities

deferred revenues and sales tax payable typically are reported as

current liabilities

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

uncertain situation

for a manufacturer the most commonly reported contingent liabilities relate to product

warranty

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

warranty