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

A) True
B) False

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

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Georgia's Salon The salon sells $50,000 of gift cards in May 2012.These gift cards may be used anytime before their expiration on May 31,2013. Refer to Georgia's Salon.During May 2013,$10,000 of the gift cards were redeemed for salon services.Which of the following is the correct journal entry to record the redemption of the gift cards?


A)
Georgia's Salon The salon sells $50,000 of gift cards in May 2012.These gift cards may be used anytime before their expiration on May 31,2013. Refer to Georgia's Salon.During May 2013,$10,000 of the gift cards were redeemed for salon services.Which of the following is the correct journal entry to record the redemption of the gift cards? A) B) C) D)
B)
Georgia's Salon The salon sells $50,000 of gift cards in May 2012.These gift cards may be used anytime before their expiration on May 31,2013. Refer to Georgia's Salon.During May 2013,$10,000 of the gift cards were redeemed for salon services.Which of the following is the correct journal entry to record the redemption of the gift cards? A) B) C) D)
C)
Georgia's Salon The salon sells $50,000 of gift cards in May 2012.These gift cards may be used anytime before their expiration on May 31,2013. Refer to Georgia's Salon.During May 2013,$10,000 of the gift cards were redeemed for salon services.Which of the following is the correct journal entry to record the redemption of the gift cards? A) B) C) D)
D)
Georgia's Salon The salon sells $50,000 of gift cards in May 2012.These gift cards may be used anytime before their expiration on May 31,2013. Refer to Georgia's Salon.During May 2013,$10,000 of the gift cards were redeemed for salon services.Which of the following is the correct journal entry to record the redemption of the gift cards? A) B) C) D)

E) None of the above
F) A) and B)

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Which of the following is not classified as a current liability account?


A) Accounts payable
B) Note payable,due in 2 years
C) Salaries and wages payable
D) Income taxes payable

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

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Which of the following statements regarding accounts payable is false?


A) Accounting for accounts payable is really just the flip side of accounts receivable.
B) Accounts payable arise when a business purchases goods or services on credit.
C) Accounts payable arise when a business promises to purchase goods or services in the future.
D) Accounts payable seldom require the payment of interest.

E) A) and B)
F) None of the above

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There are some liabilities,such as income taxes payable and the estimated warranty liability,for which the amounts must be estimated so they can be recorded in the same period as the related revenues.Failure to record these amounts in the same period as the related revenues is a violation of the


A) concept of historical cost
B) going concern assumption
C) limitation of materiality
D) matching principle

E) B) and C)
F) A) and B)

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Gainesville Truck Center This company has a weekly payroll of $10,000 for its employees who work Monday through Friday.Federal and state income taxes are withheld in the amounts of $1,700 and $400,respectively,and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare) .In addition,the federal and state unemployment taxes are applied at rates of 2% and 5%,respectively.The company's year-end is December 31. -Refer to the information for Gainesville Truck Center.Which of the following statements is true regarding the entry to record wages and the related liabilities?


A) FICA tax expense will be debited in the amount of $765.
B) Social security tax payable will be debited in the amount of $620.
C) Medicare tax payable will be credited in the amount of $145.
D) Federal income taxes payable will be credited in the amount of $2,100.

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

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A manufacturing company's weekly payroll is $80,000 for a 5-day work week beginning each Monday and ending each Friday.The last time salaries and wages were recorded was Friday,December 26.What adjustment is needed on December 31,the last day of the company's fiscal period?


A) Increase wages expense by $48,000
B) Decrease wages payable by $48,000
C) Decrease cash by $48,000
D) No adjustment is necessary since the next payday will not occur until the following year.

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

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"You Decide" Essay You are the owner of small chain of sporting goods.Currently,you pay a media company to maintain the company's website and Internet sales processing software system.You are considering bringing that operation in-house by hiring an Information Technology (IT)employee. What factors should you consider in making this decision?

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Of course,the primary concern is which a...

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Geiss Motorsports sold 50 motorbikes for $1,000 each.The bikes carry a 2-year warranty for repairs.Estimates indicate that repair costs will average 2% of the total selling price.What is the amount that would be recorded in the estimated warranty liability account as a result of selling the bikes?


A) $1,000
B) $ 500
C) $ 20
D) No liability should be recorded until the bikes are returned for repairs.

E) C) and D)
F) None of the above

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General Lighting During the first quarter of 2012,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.Which of the following records the sale of the batteries?


A)
General Lighting During the first quarter of 2012,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.Which of the following records the sale of the batteries? A) B) C) D)
B)
General Lighting During the first quarter of 2012,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.Which of the following records the sale of the batteries? A) B) C) D)
C)
General Lighting During the first quarter of 2012,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.Which of the following records the sale of the batteries? A) B) C) D)
D)
General Lighting During the first quarter of 2012,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.Which of the following records the sale of the batteries? A) B) C) D)

E) None of the above
F) B) and C)

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

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A company has $8,000 in cash,$9,250 in accounts receivable,and $19,500 in inventory.If current liabilities are $14,350,then the quick ratio will be


A) 5.0
B) 2.6
C) 2.0
D) 1.2

E) A) and C)
F) A) and B)

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Which of the following would appear on the balance sheet as a current liability?


A) A probable loss in the amount of $4 million from a pending lawsuit.
B) A possible loss in the amount of $4 million from a pending lawsuit.
C) A probable loss from a pending lawsuit,the amount of which is not yet determinable.
D) A lawsuit for $4 million for which the likelihood of loss is remote.

E) A) and D)
F) None of the above

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Which of the following would appear on the balance sheet as a current liability?


A) A loss that could be expected upon the occurrence of a strike by employees.
B) Potential damages from the risk of explosions in a fireworks factory.
C) Payments that are likely to occur for pension benefits to employees.
D) A possible loss from a threatened lawsuit.

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

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

A) True
B) False

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Which of the following statements regarding liabilities is true?


A) Liabilities must be legally enforceable to a known recipient.
B) Liabilities arise from past activities that require some future sacrifice of economic benefits.
C) The accounting principles followed in the U.S.require that current liabilities be listed in order of decreasing amounts on the balance sheet.
D) The accounting principles followed in the U.S.differ substantially from those of other countries,especially with respect to current liabilities.

E) B) and D)
F) All of the above

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Assume a company has a current ratio of 2.Payment of accrued wages payable would cause the current ratio to


A) decrease.
B) increase.
C) be unchanged since the effects offset one another.
D) be unchanged since it has no impact on any current asset or liability accounts.

E) A) and B)
F) A) and C)

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A company has a note payable that is due on December 31,2013.In its December 31,2012,balance sheet,this note payable should be classified as a(n)____________________.

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

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