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Exam 8: Current Liabilities

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Question 1

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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?

A) 1.47.
B) 2.00.
C) 2.84.
D) 3.86.

E) All of the above
F) None of the above

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Question 2

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The current ratio is calculated by dividing current liabilities by current assets.

A) True
B) False

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Question 3

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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.

Additional employee benefits paid for by the employer are often referred to as fringe benefits.

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 FICA maximum base amount is $113,700,through what month will Social Security be withheld?

All states impose a state income tax.

On September 1,2015,Daylight Donuts signed a $100,000,9%,six-month note payable with the amount borrowed plus accrued interest due six months later on March 1,2016.Daylight Donuts records the appropriate adjusting entry for the note on December 31,2015.In recording the payment of the note plus accrued interest at maturity on March 1,2016,Daylight Donuts would

Listed below are several terms and phrases associated with current liabilities.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

Carpenter Inc.estimates warranty expense at 2% of sales.Sales during the year were $4 million and warranty expenditures were $44,000.What was the balance in the Warranty Liability account at the end of the year?

Listed below are several terms and phrases associated with current liabilities.Pair each item from List A (by letter)with the item from List B that is most appropriately associated with it.

If a company borrows from another company rather than from a bank,the note is referred to as commercial paper.

At times,businesses require advance payments from customers that will be applied to the purchase price when goods are delivered or services provided.These customer advances represent:

Why is it important to distinguish between current and long-term liabilities?

The current ratio is

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 FICA maximum base amount is $113,700,how much will be withheld during the year for the coach's Social Security and Medicare.

Which of the following is true regarding the relationship between the current ratio and the acid-test ratio?

On December 1,2015,Old World Deli signed a $300,000,5%,six-month note payable with the amount borrowed plus accrued interest due six months later on June 1,2016.Old World Deli should record which of the following adjusting entries at December 31,2015?

A contingent liability should be recorded on a company's financial statements only if the likelihood of a loss occurring is:

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

When a company delivers a product or service for which a customer has previously paid,the company records the following: