Deck 8: Current Liabilities

Question 1

A liability must be recognized when a business is required to transfer assets or provide services to another entity at some point in the future for activities that have already occurred.

Answer 1

True

Question 2

A contingent liability must be recorded if it is reasonably possible and the amount can be reasonably estimated.

Answer 2

False

Question 3

A probable loss from a lawsuit that can be reasonably estimated should NOT be reported on the balance sheet as a current liability.

Answer 3

False

Question 4

An example of a current liability is the current maturity of a long-term debt.

Question 5

When a company sells goods or provides services for a customer but the customer intends to pay later,the company must record a current liability.

Question 6

A company provides a one-year warranty for its products.The estimated cost of parts and labor required to satisfy warranty claims should be recorded as a current liability in the period the products are sold.

Question 7

An example of a current liability is a note payable that is due in eight months.

Question 8

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.

Question 9

Employers withhold taxes from their employees' gross pay and later pay these amounts withheld to the taxing authority.

Question 10

An example of a current liability is a note payable that is due in two years.

Question 11

When accrual basis accounting matches an expense to a period before it is actually paid,an adjusting entry is necessary to record the accrued expense and corresponding liability.

Question 12

When a company uses past experience to estimate the amount of likely warranty claims in the future,a current liability account must be created.

Question 13

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

Question 14

Sales taxes collected from customers should be recorded in a liability account until the cash is passed along to the taxing authority.

Question 15

Federal excise taxes payable is NOT a current liability.

Question 16

The proceeds from advance ticket sales for a concert to be held next month should be recorded as a current liability.

Question 17

A company's management expects to incur future expenses related to the repair or replacement of defective products sold.Those expenses must be matched to revenues in the period of the repair or replacement.

Question 18

Federal income taxes payable is NOT a current liability.

Question 19

Warranty expenses result when a company sells products then estimates the units and cost per unit for repairs and replacements that may occur during the warranty period.

Question 20

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

Question 21

Acceptable current ratios vary from industry to industry,but a general rule of thumb is that a current ratio greater than ____________________ is appropriate.

Question 22

An obligation that involves an existing condition for which the outcome is NOT known with certainty and depends upon some event that will occur in the future is called a(n)____________________.

Question 23

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

Question 24

The current ratio is calculated as follows: Current assets / Current liabilities.

Question 25

The operating cash flow ratio is computed by dividing cash flows from operating activities by ____________.

Question 26

The quick ratio is calculated as follows: (Cash + Marketable securities + Accounts receivable)/ Current liabilities.

Question 27

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

Question 28

Interest on a note payable can be calculated by multiplying the amount owed by the interest rate by the fraction of year that represents the time elapsed since borrowing.

Question 29

A company has a note payable that is due on December 31,Year 2.In its December 31,Year 1,balance sheet,this note payable should be classified as a(n)____________________.

Question 30

Liquidity relates to a company's ability to sell its assets for amounts that exceed the assets' book values.

Question 31

____________________ are commitments that represent probable future sacrifices of economic benefits.

Question 32

Contingent liabilities must be recorded in the accounting records if they are probable and the amount can be reasonably estimated.

Question 33

The operating cash flow ratio is calculated by dividing the cash flows from operating activities by current liabilities.

Question 34

The cash ratio is calculated by dividing cash flows from operating activities by current liabilities.

Question 35

Accounts payable represent amounts owed to outside suppliers of goods and services; whereas ____________________ reflect amounts owed in which a formal agreement or contract has been signed.

Question 36

If a reasonable estimate of the loss cannot be made,then a contingent liability should be recognized in the ____________________.

Question 37

A contingent liability must be recognized in the accounting records if it ____________________ and a reasonable estimate of the loss can be made.

Question 38

The operating cash flow ratio is calculated by dividing current assets by cash flows from operating activities.

Question 39

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

Question 40

The cash ratio is calculated as follows: (Cash + Marketable securities)/ Current liabilities.

Question 41

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

Question 42

A fast food restaurant sells gift cards,which may be redeemed at any time; however,they expire in one year.At the time these gift cards are sold,the account to be credited is called ____________________.

Question 43

An adjusting entry to record accrued interest on a note payable includes a debit to interest expense and a credit to ____________________.

Question 44

Match each of the following current liabilities with its meaning.

-amounts funded by companies to provide benefits to fired workers

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 45

Match each of the following current liabilities with its meaning.

-an accrued liability for amounts owed to employees for work performed

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 46

____________________ refers to the ability of a company to meet its short-term obligations.

Question 47

Match each of the following current liabilities with its meaning.

-amounts expected to be paid to repair or replace defective products

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 48

When a company records the gross wages paid to its employees,the accounts to be credited include various taxes payable and ____________________.

Question 49

Current liabilities require a transfer of assets or performance of services within the longer of ____________________ or one operating cycle.

Question 50

Match each of the following current liabilities with its meaning.

-an accrued liability that represents the cost of borrowing

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 51

Match each of the following current liabilities with its meaning.

-amounts collected from customers in advance

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 52

Match each of the following current liabilities with its meaning.

-Canada Pension Plan owed

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 53

Match each of the following current liabilities with its meaning.

-a contractual agreement to borrow and repay money

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 54

Match each of the following current liabilities with its meaning.

-amounts collected from customers that must be passed along to the state

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 55

A(n)____________________ usually guarantees the repair or replacement of defective goods during a period ranging from a few days to several years following the sale.

Question 56

Match each of the following current liabilities with its meaning.

-amounts owed for purchases on credit

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 57

A flour mill orders grain sacks from a local farmer.When the company places an order for grain on account,the corresponding journal entry includes a debit to supplies and a credit to ____________________.

Question 58

Match each of the following current liabilities with its meaning.

-CPP

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 59

When a retail company sells products to customers on credit for the amount of the sales price plus the applicable sales tax,the related journal entry includes a debit to accounts receivable,a credit to sales revenue,and a credit to ____________________.

Question 60

When a company estimates the amount of expected warranty expenses to be incurred in the future pertaining to past product sales,the account to be credited is called the ____________________.

Question 61

Match each of the following current liabilities with its meaning.

-federal income taxes

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 62

Match each of the following current liabilities with its meaning.

-(cash + marketable securities)/ current liabilities

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 63

Match the following terms with the appropriate definition.

-taxes paid to the government by both employees and employers

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 64

Match each of the following current liabilities with its meaning.

-provincial employment taxes

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 65

Match each of the following current liabilities with its meaning.

-cash flows from operating activities / current liabilities

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 66

Match the following terms with the appropriate definition.

-probable future sacrifices of economic benefits

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 67

Match each of the following current liabilities with its meaning.

-current assets / current liabilities

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 68

Match the following terms with the appropriate definition.

-obligations that require the firm to pay cash or another current asset within one year

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 69

Match the following terms with the appropriate definition.

-guarantees the repair or replacement of defective goods during a specified period following the sale

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 70

Match the following terms with the appropriate definition.

-liabilities created by adjusting entries

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 71

Match each of the following current liabilities with its meaning.

-employment taxes

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 72

Match each of the following current liabilities with its meaning.

-gross pay

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 73

Match each of the following current liabilities with its meaning.

-CPP taxes

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 74

Match the following terms with the appropriate definition.

-obligations whose amounts,timing,or recipient depend on future events

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 75

Match each of the following current liabilities with its meaning.

-federal employment taxes

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 76

Match the following terms with the appropriate definition.

-taxes and other amounts deducted from gross pay

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings

Question 77

Match each of the following current liabilities with its meaning.

-fringe benefits

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 78

Match each of the following current liabilities with its meaning.

-(cash + marketable securities + accounts receivable)/ current liabilities

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 79

Match each of the following current liabilities with its meaning.

-provincial income taxes

A)account payable
B)note payable
C)wages payable
D)interest payable
E)sales taxes payable
F)CPP payable
G)employment taxes payable
H)unearned sales revenues
I)estimated warranty liability

Question 80

Match the following terms with the appropriate definition.

-taxes levied by state and local governments

A)accrued liabilities
B)contingent liabilities
C)current liabilities
D)interest rate
E)liabilities
F)payroll taxes
G)sales taxes
H)warranty
I)withholdings