Exam 8: Current and Contingent Liabilities

For any given contingent liability, a company must choose between recording it on the accounting records or disclosing it in the footnotes to the financial statements

Assume a company has a current ratio of 0.75. The purchase of inventory on account would cause the current ratio to

A company expects to receive a substantial cash settlement from a lawsuit. Therefore, the company must record this on its accounting records if a reasonable estimate can be made of the amount to be received.

Match each of the following current liabilities with its meaning. -Amounts collected from customers that must be passed along to the state.

Match the following terms with the appropriate definition. -Obligations whose amounts, timing, or recipient depend on future events

Match each of the following current liabilities with its meaning. -Medicare taxes

A(n) ____________________ arises when a business purchases goods or services on credit.

Match each of the ratios named with the proper formula for computation. -Cash Flows from Operating Activities / Current Liabilities

During May of the current year, Grant Park Refinery sold, on credit, 1,200,000 gallons of motor fuel at $1.89 each plus Georgia sales tax of 6%. Included in the price per gallon was a $0.42 federal excise tax. All taxes collected are paid to the appropriate taxing authority at the end of the quarter. ​ Prepare the appropriate journal entries on May 31 and June 30.

The current ratio is computed by dividing current assets by ____________________.

Why is the liability for warranties recognized during the period when products are sold rather than the period when warranty claims are satisfied?

Match each of the ratios named with the proper formula for computation. -(Cash + Marketable Securities) / Current Liabilities

What is meant by the term "current maturities of long-term debt" in the current liabilities section of a balance sheet?

Goldberg Financials The following footnote accompanied this company’s financial statements: Note 7 ? Litigation On December 2, 2019, the Company was served with a class action complaint filed in federal court filed in Covington, Kentucky. The complaint, captioned Bradford Haynes vs. The Company, was filed by a shareholder of the Company on behalf of himself and other shareholders who purchased the Company's common stock during the period of March 31, 2018, through December 31, 2018. The plaintiff alleges that the Company violated federal securities laws by making untrue statements of material facts and omitting material facts concerning the Company's construction and start-up of its new manufacturing facility in Plano, Texas. Also named as defendants in the complaint are certain officers and directors of the Company. The Plaintiff is seeking an unspecified amount of monetary damages. While this action is in its preliminary stages, management believes that the allegations are without merit and the Company intends to defend the lawsuit vigorously. -Refer to Goldberg Financials. What type of liability is presented in this disclosure?

General Lighting ​ During the first quarter of the current year, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. -Refer to General Lighting. What is the amount of the accounts receivable as a result of this transaction?

____________________ is the liability created when customers pay for goods or services in advance.

The payment of Accounts Payable results in a(n)

Graphic Designs, Inc. engaged in the following transactions during the current year: Prepare journal entries for each of these transactions.

Which of the following would appear only in the footnotes accompanying the financial statements?

Which of the following statements about current liabilities is true?