Exam 8: Current and Contingent Liabilities

On May 1, a company borrowed $30,000 from the First National Bank on a 1-year, 6% note. Assuming the company keeps its records on a calendar year basis, an entry is needed on December 31st to increase

Assume a company has a current ratio of 2. Payment of accrued wages payable would cause the current ratio to

The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is?

Match the following terms with the appropriate definition. -Probable future sacrifices of economic benefits

A company has current assets of $4,400, current liabilities of $2,750, and long-term liabilities of $5,500. If the operating cash flow ratio is 1.5, then cash flows from operating activities must be

Match the following terms with the appropriate definition. -Obligations that require the firm to pay cash or another current asset within one year

Giff Services Company experienced some difficulties with cash flow so it approached one of its vendors about a payment extension. The vendor agreed to the extension on the condition that the company sign a note that includes 9% interest. What is the impact on the accounting equation of recording a note payable in exchange for the account payable?

Grady Company's hourly employees earned $55,600 in the pay period ending March 31. Assume further that federal and state income taxes withheld are $9,452 and $2,224, respectively. In addition, social security and medicare taxes are applicable at rates of 6.2% and 1.45%, respectively, and federal and state unemployment taxes are applicable at rates of 4.5% and 3%, respectively. All wages are subject to these taxes. A)Prepare the journal entry related to the $55,600 gross pay earned by the company's employees. Round all amounts to the nearest dollar, if necessary. B)Prepare the journal entry for the company's payroll taxes over and above gross pay. Round all amounts to the nearest dollar, if necessary.

A company is required to estimate a liability for repairs for products sold with a warranty. In the year following the sale, the firm's accountants find that the estimated amount for repairs has been overstated. The correct accounting procedure in the year following the sale is to

The cash ratio is calculated by dividing current liabilities by the total of cash and marketable securities.

What is the purpose of the current ratio? How does it differ from the quick ratio?

Good Time Carts offers a one-year warranty on all its golf carts. Estimates suggest that two percent of carts sold will require warranty service and that the average warranty claim will cost $215. During 2019, the company sold 450 golf carts. A)Record the entry at the end of 2019 to record the warranty expenses. B)Assume the company incurred costs of $280 in inventory and $680 in cash paid for wages in connection with warranty work performed during the first quarter of 2020. Record the proper entry to recognize these costs.

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

Great Dane Trailers has the following data available for its March 31 payroll: Federal unemployment tax and state unemployment tax are also applicable at rates of 0.8% and 3.5%, respectively. All wages are subject to these taxes. Prepare the journal entries to record the wages earned and payroll taxes.

A current liability is defined as a commitment or obligation which requires a company to transfer assets, create a new current liability, or provide services to another entity at some point in the future that must occur

Groovy Swing is a retail store specializing in golf equipment and apparel. On February 1 of the current year, the company borrows $250,000 cash from the bank with a six-month, 6% note payable. The note is used to finance the acquisition of inventory for the spring selling season. ​ Prepare the company's necessary journal entries on February 1st and the note's maturity date.

A company has total assets of $350,000 consisting of current assets of $115,000, property, plant, and equipment of $200,000, and other assets of $35,000. The company has total liabilities of $100,000 consisting of current liabilities of $65,000 and other liabilities of $35,000. What is the current ratio?

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. Should the company record a liability in 2019 for this litigation? Why or why not?

Current liabilities should include any amounts that have been accrued as expenses but not yet paid.

A company has property, plant, and equipment of $500,000, current liabilities of $70,000, and long-term liabilities are $300,000. If the company's current ratio is 3.0, what are current assets?