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