Question 1

Which of the following most likely is a definitely determinable liability during interim periods?

Accepted Answer

A)  Estimated property tax payable 
B)  Accrued interest payable 
C)  Estimated product warranty liability 
D)  Estimated income taxes payable 
A)  Estimated property tax payable 
B)  Accrued interest payable 
C)  Estimated product warranty liability 
D)  Estimated income taxes payable

Question 2

The federal and state unemployment tax rates are identical.

Accepted Answer

A) True 
 B)False

Question 3

Current liabilities are debts that are expected to be satisfied within

Accepted Answer

A)  one year or the normal operating cycle, whichever is shorter. 
B)  one year or the normal operating cycle, whichever is longer. 
C)  one year. 
D)  the normal operating cycle. 
A)  one year or the normal operating cycle, whichever is shorter. 
B)  one year or the normal operating cycle, whichever is longer. 
C)  one year. 
D)  the normal operating cycle.

Question 4

There is no limit to the amount of income subject to the Medicare tax.

Accepted Answer

A) True 
 B)False

Question 5

At the time a company signs a contract to pay an employee a certain salary in the future, it records a liability.

Accepted Answer

A) True 
 B)False

Question 6

A company wishes to make deposits at the end of the next four years to accumulate a fund of $60,000. The annual contributions equal $60,000 multiplied by the appropriate present value of an ordinary annuity factor.

Accepted Answer

A) True 
 B)False

Question 7

Fabian Company is considering the purchase of a machine that will save the company $2,000 per year in operating costs for a period of seven years. The most it should pay for the machine is equal to

Accepted Answer

A)  $2,000 times the present value of an ordinary annuity for 7 periods. 
B)  $14,000. 
C)  $2,000 divided by the future value of a single sum at the end of 7 periods. 
D)  $2,000 times the future value of an ordinary annuity for 7 periods. 
A)  $2,000 times the present value of an ordinary annuity for 7 periods. 
B)  $14,000. 
C)  $2,000 divided by the future value of a single sum at the end of 7 periods. 
D)  $2,000 times the future value of an ordinary annuity for 7 periods.

Question 8

The payables turnover is measured

Accepted Answer

A)  in days. 
B)  as a percentage. 
C)  in dollars. 
D)  in times. 
A)  in days. 
B)  as a percentage. 
C)  in dollars. 
D)  in times.

Question 9

Current liabilities are classified as either definitely determinable liabilities or contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 10

An ordinary annuity is a series of equal payments made at the end of equal intervals of time.

Accepted Answer

A) True 
 B)False

Question 11

A contingent liability eventually becomes either a true liability or no liability at all.

Accepted Answer

A) True 
 B)False

Question 12

Potential vacation pay should be accounted for as a commitment.

Accepted Answer

A) True 
 B)False

Question 13

When a company discounts a note receivable at the bank, it has a contingent liability.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following does not represent a liability?

Accepted Answer

A)  An obligation for estimated income taxes payable 
B)  Interest that has accrued on a bank loan 
C)  An obligation to pay for goods purchased, payable one year after purchase 
D)  An obligation for future purchases of goods 
A)  An obligation for estimated income taxes payable 
B)  Interest that has accrued on a bank loan 
C)  An obligation to pay for goods purchased, payable one year after purchase 
D)  An obligation for future purchases of goods

Question 15

A liability for dividends exists only when the board of directors declares them.

Accepted Answer

A) True 
 B)False

Question 16

Because accounting measures should be verifiable, liabilities should not be estimated.

Accepted Answer

A) True 
 B)False

Question 17

The classification of a liability as current or long-term is important because it may affect the evaluation of a company's liquidity.

Accepted Answer

A) True 
 B)False

Question 18

Use this information to answer the following question. Baker Company has the following information for the pay period of January 1-15, 2010. Payment occurs on January 20.
$\begin{array}{lrlr}
\text { Gross payroll } & \$ 16,000 & \text { Federal income taxes withheld } & \$ 1,800 \
\text { Social security and Medicare rate } & 7.65 \% & \text { Federal unemployment tax rate } & 8 \% \
\text { State unemployment tax rate } & 5.4 \% & &
\end{array}$ The entry to record the payroll taxes expense would include a credit to

Accepted Answer

A)  Salaries Payable. 
B)  Federal Income Taxes Payable. 
C)  Social Security Tax Payable. 
D)  Cash. 
A)  Salaries Payable. 
B)  Federal Income Taxes Payable. 
C)  Social Security Tax Payable. 
D)  Cash.

Question 19

Ronald Company has current assets of $115,000 and current liabilities of $75,000 of which accounts payable are $65,000. Arnold's cost of goods sold is $420,000, its merchandise inventory increased by $20,000, and accounts payable were $45,000 the prior year. Calculate Ronald's working capital, payables turnover, and days' payable.

Accepted Answer

Working Capital = Current Asse

Question 20

The higher the interest rate assumed, the

Accepted Answer

A)  higher the present value of an ordinary annuity. 
B)  more one must deposit today to accumulate to a desired sum. 
C)  lower the future value of a sum invested in the bank today. 
D)  lower the present value of a sum due in the future. 
A)  higher the present value of an ordinary annuity. 
B)  more one must deposit today to accumulate to a desired sum. 
C)  lower the future value of a sum invested in the bank today. 
D)  lower the present value of a sum due in the future.

Exam 10: Current Liabilities and Fair Value Accounting

Which of the following most likely is a definitely determinable liability during interim periods?

The federal and state unemployment tax rates are identical.

Current liabilities are debts that are expected to be satisfied within

There is no limit to the amount of income subject to the Medicare tax.

At the time a company signs a contract to pay an employee a certain salary in the future, it records a liability.

A company wishes to make deposits at the end of the next four years to accumulate a fund of $60,000. The annual contributions equal $60,000 multiplied by the appropriate present value of an ordinary annuity factor.

Fabian Company is considering the purchase of a machine that will save the company $2,000 per year in operating costs for a period of seven years. The most it should pay for the machine is equal to

The payables turnover is measured

Current liabilities are classified as either definitely determinable liabilities or contingent liabilities.

An ordinary annuity is a series of equal payments made at the end of equal intervals of time.

A contingent liability eventually becomes either a true liability or no liability at all.

Potential vacation pay should be accounted for as a commitment.

When a company discounts a note receivable at the bank, it has a contingent liability.

Which of the following does not represent a liability?

A liability for dividends exists only when the board of directors declares them.

Because accounting measures should be verifiable, liabilities should not be estimated.

The classification of a liability as current or long-term is important because it may affect the evaluation of a company's liquidity.

The higher the interest rate assumed, the

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

Cost Behavior Analysis

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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