Quiz 3
Which of the following items is not included in an employer's payroll tax expense? - Federal unemployment taxes - F.I.C.A. (social security) taxes - State unemployment taxes - Federal income taxes
Federal income taxes
Prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio.
False
Which of the following items should not be included in the Cash caption on the balance sheet? - Checks from other parties presently in the cash register - Coins and currency in the cash register - Amounts on deposit in checking account at the bank - Postage stamps on hand
Postage stamps on hand
Why would a company sell receivables to another company? - To accelerate access to amounts collected - To comply with customer agreements - To improve the quality of its credit-granting process - To limit its legal liability
To accelerate access to amounts collected
Companies should recognize the expense and related liability for compensated absences in the year earned by employees.
True
Current liabilities are usually recorded and reported in financial statements at their full maturity value.
True
Savings accounts are usually classified as cash on the balance sheet.
True
Which of the following may be a current liability? - Withheld Income Taxes - Deposits Received from Customers - Deferred Revenue - All of these answers are correct
All of these answers are correct
When a customer purchases inventory from a business organization, they may be given a discount which is designed to induce prompt payment. Such a discount is called a(n) - enhancement discount - nominal discount - cash discount - trade discount
Cash discount
Which of the following statements is true regarding the receipt of a refundable deposit? - Assets and equity increase - The resulting liability will always be reported as a current obligation - Assets and equity decrease - Cash is debited and Refundable Deposit Liability is credited
Cash is debited and Refundable Deposit Liability is credited
What is the normal journal entry when writing off an account as uncollectible under the allowance method? - Debit Bad Debt Expense, credit Allowance for Doubtful Accounts - Debit Allowance for Doubtful Accounts, credit Bad Debt Expense - Debit Allowance for Doubtful Accounts, credit Accounts Receivable - Debit Accounts Receivable, credit Allowance for Doubtful Accounts
Debit Allowance for Doubtful Accounts, credit Accounts Receivable
Which of the following is a characteristic of a current liability but not a long-term liability? - The transaction or other event creating the liability has already occurred - It is a present obligation that entails settlement by probable future transfer or use of cash, goods, or services - Its liquidation is reasonably expected to require the use of existing resources classified as current assets or create other current liabilities - It is an unavoidable obligation
Its liquidation is reasonably expected to require the use of existing resources classified as current assets or create other current liabilities
Which of the following does not allow a company to exclude a short-term obligation from current liabilities? - The company has a contractual right to defer settlement of the liability for at least one year after the balance sheet date - The company actually refinanced the obligation - The liability is contractually due more than one year after the balance sheet date - Management indicates that they are going to refinance the obligation
Management indicates that they are going to refinance the obligation
Which of the following should be recorded in Accounts Receivable? - Receivables from officers - Receivables from subsidiaries - Dividends receivable - Oral promises from customers to pay for goods or services sold
Oral promises from customers to pay for goods or services sold
Which of the following statements is correct regarding receivables? - Receivables are non-financial assets - Receivables are written promises of the purchaser to pay for goods or services - Receivables that are expected to be collected within a year are classified as noncurrent - Receivables are claims held against customers and others for money, goods, or services
Receivables are claims held against customers and others for money, goods, or services
The advantage of estimating a company's bad debt expense based on its outstanding accounts receivable is that this approach - gives a reasonably correct statement of receivables in the balance sheet - best relates bad debt expense to the period of sale - makes estimates of uncollectible accounts unnecessary - is the only generally accepted method for valuing accounts receivable
gives a reasonably correct statement of receivables in the balance sheet
Which of the following accounts would be classified as a current liability? - notes payable due within one three-year operating cycle - losses expected to be incurred within the next twelve months in excess of the company's insurance coverage - accounts payable with debit balances - expected recovery from a lawsuit where the likelihood of success is probable
notes payable due within one three-year operating cycle
Travel advances should be reported as - receivables - cash because they represent the equivalent of money - investments - supplies
receivables
Bank overdrafts, if material, should be - reported as a deduction from the current asset section - reported as a current liability - reported as a deduction from cash - netted against cash and a net cash amount reported
reported as a current liability
Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty - need not be disclosed - should be reported as current - should be reported as long-term - should be reported as part current and part long-term
should be reported as part current and part long-term
