Question 1

Uncertainties from the development of new competing products are contingent liabilities.

Accepted Answer

A) True 
 B)False

Question 2

All of the following statements related to recording warranty expense are True except:

Accepted Answer

A)  Recording estimated warranty expense complies with the full disclosure principle. 
B)  Warranty expense should be recorded in the period when the warranty service is performed. 
C)  Recording estimated warranty expense complies with the matching principle. 
D)  The seller reports a warranty obligation as a liability. 
E)  Warranty costs are probable and the amount can be estimated. 
A)  Recording estimated warranty expense complies with the full disclosure principle. 
B)  Warranty expense should be recorded in the period when the warranty service is performed. 
C)  Recording estimated warranty expense complies with the matching principle. 
D)  The seller reports a warranty obligation as a liability. 
E)  Warranty costs are probable and the amount can be estimated.

Question 3

Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

Accepted Answer

A) True 
 B)False

Question 4

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

Accepted Answer

A) True 
 B)False

Question 5

Agro Depot's income before interest expense and income taxes was $5,909 million, and interest expense was $37 million. Calculate Agro Depot's times interest earned.

Accepted Answer

The answer of Agro Depot's income before interest expense and...

Question 6

Accounting for contingent liabilities covers three possibilities. (1) The future event is probable and the amount cannot be reasonably estimated. (2) The future event is remote or unlikely to recur. (3) The likelihood of the liability to occur is impossible.

Accepted Answer

A) True 
 B)False

Question 7

The times interest earned ratio reflects:

Accepted Answer

A)  A company's ability to pay its operating expenses on time. 
B)  A company's ability to pay interest even if sales decline. 
C)  A company's profitability. 
D)  The relation between income and debt. 
E)  The relation between assets and liabilities. 
A)  A company's ability to pay its operating expenses on time. 
B)  A company's ability to pay interest even if sales decline. 
C)  A company's profitability. 
D)  The relation between income and debt. 
E)  The relation between assets and liabilities.

Question 8

Explain how to calculate times interest earned. Explain how it is used to analyze a company's risk.

Accepted Answer

The times interest earned ratio is calcu

Question 9

A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:

Accepted Answer

A)  Consider the warranty expense a remote liability since the rate is only 2%. 
B)  Recognize warranty expense at the time the warranty work is performed. 
C)  Recognize warranty expense and liability in the year of the sale. 
D)  Consider the warranty expense a contingent liability. 
E)  Recognize warranty liability when the company purchases the trampolines. 
A)  Consider the warranty expense a remote liability since the rate is only 2%. 
B)  Recognize warranty expense at the time the warranty work is performed. 
C)  Recognize warranty expense and liability in the year of the sale. 
D)  Consider the warranty expense a contingent liability. 
E)  Recognize warranty liability when the company purchases the trampolines.

Question 10

Matt and Bryan Walls of SnorgTees stress the importance of managing liabilities. What are some of the liabilities that the brothers discovered they would have to manage to be successful?

Accepted Answer

To control costs and liabilities, the br

Question 11

All of the following statements regarding liabilities are True except:

Accepted Answer

A)  A liability is a probable future payment of assets or services. 
B)  Unearned future wages to be paid to employees should be recorded as liabilities. 
C)  For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services. 
D)  Information about liabilities is more useful when the balance sheet identifies them as either current or long term. 
E)  All of these are True. 
A)  A liability is a probable future payment of assets or services. 
B)  Unearned future wages to be paid to employees should be recorded as liabilities. 
C)  For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services. 
D)  Information about liabilities is more useful when the balance sheet identifies them as either current or long term. 
E)  All of these are True.

Question 12

Sales taxes payable:

Accepted Answer

A)  Is an estimated liability. 
B)  Is a contingent liability. 
C)  Is a current liability for retailers. 
D)  Is a business expense. 
E)  Is a long-term liability. 
A)  Is an estimated liability. 
B)  Is a contingent liability. 
C)  Is a current liability for retailers. 
D)  Is a business expense. 
E)  Is a long-term liability.

Question 13

A corporation has a $42,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $50,000. The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000.

Accepted Answer

A) True 
 B)False

Question 14

Times interest earned is computed by dividing _______________ by interest expense.

Accepted Answer

Income b e

Question 15

Unearned revenues are:

Accepted Answer

A)  Also called deferred revenues. 
B)  Amounts received in advance from customers for future delivery of products or services. 
C)  Also called collections in advance. 
D)  Also called prepayments. 
E)  All of these. 
A)  Also called deferred revenues. 
B)  Amounts received in advance from customers for future delivery of products or services. 
C)  Also called collections in advance. 
D)  Also called prepayments. 
E)  All of these.

Question 16

On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the maturity value of the note on March 1?

Accepted Answer

A)  $9,000 
B)  $9,100 
C)  $9,150 
D)  $9,200 
E)  $9,300 
A)  $9,000 
B)  $9,100 
C)  $9,150 
D)  $9,200 
E)  $9,300

Question 17

The matching principle requires that interest expense not be accrued on a note payable until the note is paid, even if the end of an accounting period occurs between the signing of a note payable and its maturity date.

Accepted Answer

A) True 
 B)False

Question 18

An estimated liability:

Accepted Answer

A)  Is an unknown liability of a certain amount. 
B)  Is a known obligation of an uncertain amount that can be reasonably estimated. 
C)  Is a liability that may occur if a future event occurs. 
D)  Can be the result of a lawsuit. 
E)  Is not recorded until the amount is known for certain. 
A)  Is an unknown liability of a certain amount. 
B)  Is a known obligation of an uncertain amount that can be reasonably estimated. 
C)  Is a liability that may occur if a future event occurs. 
D)  Can be the result of a lawsuit. 
E)  Is not recorded until the amount is known for certain.

Question 19

An employee earned $3,450 for the current period. Calculate the total and individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax (15%) assuming the entire employee's pay is subject to FICA taxes.

Accepted Answer

The answer of An employee earned $3,450 for the current...

Question 20

Companies with many employees often use a special ____________________ account to pay employees.

Accepted Answer

The answer of Companies with many employees often use a...

Exam 11: Current Liabilities and Payroll Accounting

Uncertainties from the development of new competing products are contingent liabilities.

All of the following statements related to recording warranty expense are True except:

Obligations not due within one year or the company's operating cycle, whichever is longer, are reported as current liabilities.

Payments of FUTA are made quarterly to a federal depository bank if the total amount due exceeds $500.

Agro Depot's income before interest expense and income taxes was $5,909 million, and interest expense was $37 million. Calculate Agro Depot's times interest earned.

Accounting for contingent liabilities covers three possibilities. (1) The future event is probable and the amount cannot be reasonably estimated. (2) The future event is remote or unlikely to recur. (3) The likelihood of the liability to occur is impossible.

The times interest earned ratio reflects:

Explain how to calculate times interest earned. Explain how it is used to analyze a company's risk.

A company sold $12,000 worth of trampolines with an extended warranty. It estimates that 2% of these sales will result in warranty work. The company should:

Matt and Bryan Walls of SnorgTees stress the importance of managing liabilities. What are some of the liabilities that the brothers discovered they would have to manage to be successful?

All of the following statements regarding liabilities are True except:

Sales taxes payable:

A corporation has a $42,000 credit balance in the Income Tax Payable account. Period end information shows that the actual liability is $50,000. The company should record an entry to debit Income Tax Expense for $8,000 and credit Income Taxes Payable for $8,000.

Times interest earned is computed by dividing _______________ by interest expense.

Unearned revenues are:

On November 1, Carter Company signed a 120-day, 10% note payable, with a face value of $9,000. What is the maturity value of the note on March 1?

The matching principle requires that interest expense not be accrued on a note payable until the note is paid, even if the end of an accounting period occurs between the signing of a note payable and its maturity date.

An estimated liability:

An employee earned $3,450 for the current period. Calculate the total and individual amounts to be withheld for social security (6.2%), Medicare (1.45%) and federal income tax (15%) assuming the entire employee's pay is subject to FICA taxes.

Companies with many employees often use a special ____________________ account to pay employees.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

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