Question 1

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

Accepted Answer

The answer of What is meant by the term "current...

Question 2

From the following list, identify whether the change in the account balance during the year would be reported as an operating (O), an investing (I), or a financing (F) activity or not separately reported on the statement of cash flows (N).Assume that the indirect method is used to determine the cash flows from operating activities.
-Notes payable

Accepted Answer

A) O - Operating 
B) I - Investing 
C) F - Financing 
D) N - Not separately reported on the Statement of Cash Flows

Question 3

$2,000 invested today at 12% with compound interest will yield $2,480 in 2 years.

Accepted Answer

A) True 
 B)False

Question 4

Match each of the following terms related to interest and time value of money calculations to their appropriate definition.
-Interest that is earned or paid on the principal amount only.

Accepted Answer

A) Time value of money 
B) Simple interest 
C) Compound interest 
D) Future value of a single amount 
E) Present value of a single amount
F)Annuity
G)Future value of an annuity
H)Present value of an annuity

Question 5

From the following list, identify whether the change in the account balance during the year would be reported as operating (O) cash flow, investing (I) cash flow, financing (F) cash flow or not separately (N) reported on the statement of cash flows.Assume that the indirect method is used to prepare the operating activities section.Use the following response choices a-d.
-Salaries and wages payable

Accepted Answer

A) operating (O) cash flow 
B) investing (I) cash flow 
C) financing (F) cash flow 
D) not separately (N) reported on the statement of cash flows

Question 6

The classification of current liabilities is closely tied to the concept of _____________________.

Accepted Answer

The answer of The classification of current liabilities is closely...

Question 7

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. Winston wins the lottery.He wins $20,000 per year to be paid to him for 10 years.The state offers him the choice of a cash settlement now instead of the annual payments for 10 years.If the interest rate is 6%, what is the amount the state will offer for a settlement today?

Accepted Answer

A)  $147,200 
B)  $154,440 
C)  $175,000 
D)  $200,000

Question 8

A current ratio of ____________________ or better is usually considered a comfortable margin.

Accepted Answer

The answer of A current ratio of ____________________ or better...

Question 9

If a company purchases $3,200 worth of inventory with terms of 2/10, n/30 on March 3 and pays April 2, then the amount paid to the seller would be

Accepted Answer

A)  $3,136 
B)  $3,150 
C)  $3,168 
D)  $3,200

Question 10

Contingent assets may be disclosed in the notes if probable and reasonably estimable.

Accepted Answer

A) True 
 B)False

Question 11

Long-term assets are $5,000, current liabilities are $700, and long-term liabilities are $3,000.If the current ratio is 3 to 1, then current assets are

Accepted Answer

A)  $9,000 
B)  $6,900 
C)  $4,300 
D)  $2,100

Question 12

On October 1, Lawrence Company borrowed $60,000 from Fourth National Bank on a 1-year, 7% note.If the company's fiscal year ends as of December 31, Lawrence should make an entry to increase

Accepted Answer

A)  interest expense, $4,200. 
B)  notes payable, $1,050. 
C)  interest payable, $1,050. 
D)  prepaid interest, $3,150.

Question 13

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. ​
How much would have to be deposited in a savings account earning 6%, so that equal annual withdrawals of $200 can be made at the end of each of 10 years? The balance at the end of the last year would be zero.

Accepted Answer

A)  $528 
B)  $1,472 
C)  $2,000 
D)  $2,636

Question 14

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If interest is compounded annually, the total amount of interest on an $18,000 note payable for 4 years at 10% is

Accepted Answer

A)  $5,706 
B)  $7,200 
C)  $8,352 
D)  $8,500

Question 15

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as

Accepted Answer

A)  a loss 
B)  an expense 
C)  a discount 
D)  prepaid interest

Question 16

Accrued wages is a current liability.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding contingencies is true?

Accepted Answer

A)  Contingencies that are probable and not estimable appear on the balance sheet. 
B)  Contingencies that are probable and not estimable are disclosed in the notes to the financial statements. 
C)  Contingencies that are remote but estimable are disclosed in the notes to the financial statements. 
D)  Contingent assets are recorded on the balance sheet, but not in the notes to the financial statements.

Question 18

A company gives a two-year warranty for its product.The estimated liability for product warranties is a current liability.

Accepted Answer

A) True 
 B)False

Question 19

___________________________ include any amount that has been incurred due to the passage of time, but not paid as of the balance sheet date.

Accepted Answer

The answer of ___________________________ include any amount that has been...

Question 20

Advance ticket sales for a concert next month are a current liability.

Accepted Answer

A) True 
 B)False

Exam 9: Current Liabilities, Contingencies, and the True Value of Money

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

$2,000 invested today at 12% with compound interest will yield $2,480 in 2 years.

Match each of the following terms related to interest and time value of money calculations to their appropriate definition. -Interest that is earned or paid on the principal amount only.

The classification of current liabilities is closely tied to the concept of _____________________.

A current ratio of ____________________ or better is usually considered a comfortable margin.

If a company purchases $3,200 worth of inventory with terms of 2/10, n/30 on March 3 and pays April 2, then the amount paid to the seller would be

Contingent assets may be disclosed in the notes if probable and reasonably estimable.

Long-term assets are $5,000, current liabilities are $700, and long-term liabilities are $3,000.If the current ratio is 3 to 1, then current assets are

On October 1, Lawrence Company borrowed $60,000 from Fourth National Bank on a 1-year, 7% note.If the company's fiscal year ends as of December 31, Lawrence should make an entry to increase

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations. If interest is compounded annually, the total amount of interest on an $18,000 note payable for 4 years at 10% is

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as

Accrued wages is a current liability.

Which of the following statements regarding contingencies is true?

A company gives a two-year warranty for its product.The estimated liability for product warranties is a current liability.

___________________________ include any amount that has been incurred due to the passage of time, but not paid as of the balance sheet date.

Advance ticket sales for a concert next month are a current liability.