Ch. 8 Smartbooks
How do you calculate Current Ratio?
CR = Current Assets / Current Liabilities
On November 1, Year 1, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31, Year 2. The journal entry on November 1, Year 1 would include which of the following?
Debit to Cash ($100,000) Credit to Notes Payable ($100,000)
Which of these payroll taxes are paid only by the employer? (Check all that apply.)
FUTA and SUTA
Which of the following payroll-related taxes must the employer pay by law?
Federal Insurance Contributions Act amounts Unemployment taxes
By law, an employer is required to pay which of the following amounts as payroll taxes?
Medicare contributions Social Security contributions Federal unemployment tax
Witholding taxes for federal and state income tax are based upon which terms?
Number of exemptions claimed Amounts earned by employees
Which of the following may be classified as contingent liabilities?
Product warranties Frequent flyer program awards Future litigation losses
Acid test ratio (quick ratio)
QR = Current assets - Inventory / Current liabilities
Which of the following terms are used to categorize the likelihood of the occurrence of a future loss?
Remote Probable Reasonably possible
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 (select all that apply.)
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) __________________
contingent
Product warranties, effects of environmental problems, and lawsuits are examples of transactions or events that give rise to
contingent liabilities
Liabilities are classified as
current and long-term
If a liability is classified as current, rather than non-current, the company's working capital will Blank______.
decrease
If a liability is classified as current, rather than noncurrent, the company's working capital will
decrease
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
For a manufacturer, the most commonly reported contingent liabilities relate to
product warranties
Which of the following transactions will increase a company's working capital?
receipt of cash on long-term notes receivable
A loss that is judged to be probable and for which the amount is reasonably estimable should be
recorded.
Payroll withholdings are
the items subtracted from an employee's gross pay to arrive at take-home pay.
Which of the following tends to be the source of the most commonly reported contingent liability?
warranties
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 than 1.
Acid-test ratio and Current ratio will increase
