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Exam 8: Current and Contingent Liabilities

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Question 1

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Match each of the following current liabilities with its meaning. a. Account payable b. Note payable c. Wages payable d. Interest payable e. Sales taxes payable f. FICA taxes payable g. Unemployment taxes payable h. Unearned sales revenues i. Estimated warranty liability -Amounts owed for purchases on credit.

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Question 2

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What is the impact on the accounting equation of recording a payment to a supplier on account?

A) Both assets and liabilities decrease.
B) Both assets and stockholders' equity decrease.
C) Liabilities decrease and stockholders' equity increases.
D) Liabilities increase and stockholders' equity decreases.

E) B) and D)
F) A) and B)

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Question 3

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

Refer to Goldberg Financials. Should the company record a liability in 2012 for this litigation? Why or why not?

Assume that a company has a current ratio of 3. Failure to record estimated warranty costs will cause the current ratio to be

Selected information from the firm's consolidated balance sheet is provided below. Assume that all of the account balances on the balance sheet are normal balances. -Refer to the partial balance sheet presented above for Glass Doctor. Compute the following liquidity ratios for 2014 and 2013: Assume that Glass Doctor's statement of cash flows presented cash flows from operating activities of $204.6 million and $201.1 million for the years ended December 31, 2014 and 2015, respectively. Comment on the direction and significance of the change in the ratios from 2013 to 2014.

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.

General Lighting During the first quarter of 2013, the company sold 4,000 batteries on credit for $150 each plus state sales tax of 6%. -Refer to General Lighting. Sales taxes are required to be paid to the state taxing authority at the end of the quarter. What is the amount of the current liability related to this transaction?

The total amount of interest that will be paid on a 5-year, $90,000 note payable at 11% simple annual interest is?

For each of the following transactions, indicate the impact on the accounting equation as a result of recording the related journal entry. Include an entry in each column for each transactions, whether an increase (+), decrease (-), or no effect (NE). The first transaction is shown as an example.

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.

Match each of the following current liabilities with its meaning. a. Account payable b. Note payable c. Wages payable d. Interest payable e. Sales taxes payable f. FICA taxes payable g. Unemployment taxes payable h. Unearned sales revenues i. Estimated warranty liability -Amounts expected to be paid to repair or replace defective products.

A retail company issues numerous discount coupons throughout the year. A balance in the estimated liability account indicates

For each of the types of payroll taxes and other payroll-related items listed, indicate whether it is paid by the employee through a paycheck withholding, by the employer, or both. (Choices may be used more than once.) a.Employee b.Employer c.Both -Fringe benefits

What are accrued liabilities, and what are some examples of accounts that would be classified as accrued liabilities in the current liabilities section of a balance sheet?

The amount of a current liability reported on the balance sheet for interest payable includes

The current ratio is calculated as follows: Current Assets / Current Liabilities.

Which of the following statements regarding accounts payable is false?

A current liability is defined as a commitment or obligation which requires a company to transfer assets, create a new current liability, or provide services to another entity at some point in the future that must occur

Match each of the following current liabilities with its meaning. a. Account payable b. Note payable c. Wages payable d. Interest payable e. Sales taxes payable f. FICA taxes payable g. Unemployment taxes payable h. Unearned sales revenues i. Estimated warranty liability -An accrued liability for amounts owed to employees for work performed.