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Exam 8: Current Liabilities

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Question 1

True/False

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Airlines do not record revenue when a ticket is sold,but wait to record revenue until the actual flight occurs.

A) True
B) False

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True

Question 2

Multiple Choice

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If management can estimate the amount of loss that will occur due to litigation against the company,and the likelihood of the loss is probable,a contingent liability should be

A) Disclosed,but not reported as a liability.
B) Disclosed and reported as a liability.
C) Neither disclosed nor reported as a liability.

D) A) and B)
E) A) and C)

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Question 3

Multiple Choice

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Brian Inc.borrowed $8,000 from First Bank and signed a promissory note.What entry should First Bank record?

Ogden Motors,Inc.is involved in a lawsuit.It is reasonably possible that the jury will find in favor of the plaintiff and Ogden will owe ten million dollars.What is the appropriate reporting of this lawsuit and what is the effect on the balance sheet?

Discount Travel has the following current assets: cash,$102 million;receivables,$94 million;inventory,$182 million;and other current assets,$18 million.Discount Travel also has the following liabilities: accounts payable,$98 million;current portion of long-term debt,$35 million;and long-term debt,$23 million.Based on these amounts,what is the acid-test ratio?

The employer records amounts deducted from employee payroll as liabilities until it pays them to the appropriate organizations.

When a company receives cash in advance,it debits Cash and credits a revenue account called Deferred Revenue.When a company receives cash in advance,it debits Cash and credits a liability account called Deferred Revenue.

Away Travel filed suit against West Coast Travel seeking damages for copyright violations.Away Travel's legal counsel believes it is probable (but not certain) that Away Travel will win the lawsuit for an estimated amount in the range of $100,000 to $200,000,with all amounts in the range considered equally likely.How should Away Travel report this litigation?

When a company collects sales tax from a customer,the event is recorded with a(n) _________ in Cash and a(n) _________ in Sales Tax Payable:

If the likelihood of loss is remote,disclosure usually is not required.

If the likelihood of a loss is reasonably possible rather than probable,we record no entry,but make full disclosure in a footnote to the financial statements to describe the contingency.

On September 1,2018,Daylight Donuts signed a $100,000,9%,six-month note payable with the amount borrowed plus accrued interest due six months later on March 1,2019.Daylight Donuts should report interest payable at December 31,2018,in the amount of:

At the beginning of 2018,Angel Corporation began offering a 1-year warranty on its products.The warranty program was expected to cost Angel 4% of net sales.Net sales made under warranty in 2018 were $180 million.Five percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million.The amount of warranty expense on Angel's 2018 income statement is:

Discount Travel has the following current assets: cash,$102 million;receivables,$94 million;inventory,$182 million;and other current assets,$18 million.Discount Travel also has the following liabilities: accounts payable,$98 million;current portion of long-term debt,$35 million;and long-term debt,$23 million.Based on these amounts,what is the current ratio?

Which of the following statements regarding liquidity ratios is true?

Which of the following are not included in an employer's payroll tax expense?

Which of the following is true regarding FICA taxes?

Mike Gundy is a college football coach making a base salary of $2,400,000 a year ($200,000 per month) .Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the Social Security maximum base amount is $118,500,how much will be withheld during the year for the coach's Social Security and Medicare.

When a gain contingency is probable and the amount of gain is reasonably estimable,the gain should be:

Greger Peterson is a senior manager at a public accounting firm making a base salary of $180,000 a year ($15,000 per month) .Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the Social Security maximum base amount is $118,500,through what month will Social Security be withheld?