Acc206 Quiz Ch 13

Front 1

probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events

Back 1

liabilities

Front 2

cash or other assets that companies expect to convert into cash, sell, or consume within a single operating cycle or within a year

Back 2

current assets

Front 3

period of time elapsing between the acquisition of goods and services and the final cash realization resulting from sales and subsequent collections

Back 3

operating cycle

Front 4

obligations whose liquidation is reasonably expected to require use of existing resources properly classified as current assets, or the creation of other current liabilities

Back 4

current liabilities

Front 5

10 types of current liabilities

Back 5

A/P

N/P

Sales Tax Payable

Income Taxes Payable

Dividends Payable

Long term debt

Short term obligations

Customer advances & deposits

Unearned revenue

Employee related liabilities

Front 6

balances owed to others for goods, supplies, or services purchased on open account;

time lag between the receipt of serves or acquisition of title to assets and the payment for them

Back 6

accounts payable

Front 7

written promises to pay a certain sum of money on a specified future date

Back 7

notes payable

Front 8

notes payable may be classified as _____ or _____

Back 8

short term

long term

Front 9

notes payable may be _____ bearing or ____ bearing

Back 9

interest bearing

zero interest bearing

Front 10

journal entry to record issuance of interest bearing note

Back 10

1.

cash (dr)

notes payable (cr)

2.

interest expense (dr)

interest payable (cr)

Front 11

journal entry to record issuance of zero interest bearing note

Back 11

cash (dr)

discount on notes payable (dr)

notes payable (cr)

Front 12

the contra account to notes payable

Back 12

discount on notes payable

Front 13

this account...

represents the cost of borrowing

debited to interest expense over the life of the note

represents interest expense chargeable to future periods

Back 13

discount on notes payable

Front 14

two ratios that help assess liquidity

Back 14

current ratio

acid test ratio

Front 15

current ratio =

Back 15

current assets / current liabilities

Front 16

acid test ratio =

Back 16

(cash + short term investments + net receivables)

/ current liabilities

Front 17

disclosure should include

Back 17

nature of the contingency

an estimate of the possible loss or range of loss or a statement that an estimate cannot be made

Front 18

companies should disclose which other contingent liabilities

Back 18

1. guarantees of indebtedness of others

2. obligations of commercial banks under "stand by letters of credit"

3. guarantees to repurchase receivables (or property) that have been sold or assigned

Front 19

if a company excludes a short term obligation from current liabilities bc of refinancing, it should include the following in the note to the financial statements

Back 19

1. general description of the financing agreement

2. terms of any new obligation incurred or to be incurred

3. terms of any equity security issued or to be issued

Front 20

companies may list accounts in...

Back 20

order of maturity,

descending order of amount,

order of liquidation preference

Front 21

current liabilities are usually presented

Back 21

at their full maturity value

Front 22

the difference between present value and the maturity value is considered _____

Back 22

immaterial

Front 23

do not include long term sets maturing currently if they are to be:

Back 23

1. retired by assets accumulated that have not been shown as current assets

2. refinanced, or retired from the proceeds of a new debt issue

3. converted into capital stock

Front 24

exclude from current liabilities if both of the following conditions are met:

Back 24

1. must intend to refinance the obligation on a long term basis

2. must demonstrate an ability to refinance (actually refinance or enter an agreement)

Front 25

working capital =

Back 25

current assets - current liabilities

Front 26

steps of actual refinancing

Back 26

1. issue long term debt

2. convert debt to capital stock

Front 27

amount owed by a corporation to its stockholders as a result of board of directors' authorization

Back 27

dividends payable

Front 28

dividends payable are generally paid...

Back 28

quarterly (within 3 months)

Front 29

undeclared dividends (dividends in arrears) on cumulative preferred stock is not recognized as a ...

Back 29

liability

Front 30

dividends payable in the form of additional shares of stock are reported in...

Back 30

stockholders' equity

Front 31

types of stock

Back 31

preferred

common

Front 32

which type of stock must be paid first?

Back 32

preferred

Front 33

returnable cash deposits received from customers and employees

Back 33

customer advances and deposits

Front 34

customer advances and deposits may be classified as which type of liability?

Back 34

current or long term

Front 35

payment received before delivering goods or rendering services

Back 35

unearned revenue

Front 36

retailers must collect sales taxes from customers on transfers of tangible personal property and on certain services and then remit to the proper governmental authority

Back 36

sales taxes payable

Front 37

differences between taxable income (tax law) and accounting income (GAAP) sometimes occur

true/false?

Back 37

true

Front 38

amounts owed to employees for salaries or wages are reported as a current liability

Back 38

employee related liabilities

Front 39

current liabilities related to employee compensation may include

Back 39

payroll deductions

compensated absences

bonuses

Front 40

the difference between gross pay and take home pay is due to what?

Back 40

payroll deductions

Front 41

what are the most common types of payroll deductions?

Back 41

taxes

insurance premiums

employee savings

union dues

Front 42

FICA includes which two deductions

Back 42

social security tax and medicare

Front 43

what does medicare do?

Back 43

alleviates the high cost of medical care for those over age 65

Front 44

what percent on employee's total compensation is medicare?

Back 44

1.45%

Front 45

OASDI stands for

Back 45

Old Age, Survivor, and Disability Insurance

Front 46

social security tax (OASDI) is what rate up to which limit?

Back 46

6.2% up to $113,700 annually

Front 47

FICA rate

Back 47

7.65%

(1.45 + 6.2)

Front 48

if you make more than $113,700, the FICA rate is..

Back 48

1.45% in addition to the (7.65%)

Front 49

who pays the 7.65% FICA?

Back 49

both employee and employer

Front 50

who pays FUTA?

Back 50

only employers

Front 51

FUTA stands for

Back 51

Federal Unemployment Tax Act

Front 52

FUTA rate is ____% on the first $______

Back 52

6.2%

$7000

Front 53

If employer is subject to a state unemployment tax of ___ percent or more it receives a tax credit (not to exceed ___ percent) and pays only ___ percent tax to the federal government

Back 53

5.4

5.4

0.8

Front 54

Employers must refer to the unemployment tax laws in each _____ in which they pay wages and salaries

Back 54

state

Front 55

from whom is income tax withholding deducted?

Back 55

employees only

Front 56

paid absences for vacation, illness, and holidays

Back 56

compensated absences

Front 57

accrue a liability if all the following conditions exist

Back 57

the employer's obligation in attributable to employees' services already rendered

the obligation relates to rights that vest or accumulate

payment of the compensation is probable

the amount can be reasonably estimated

Front 58

payments to certain or all employees in addition to their regular salaries or wages

Back 58

bonus agreements

Front 59

bonuses are paid on a (an) _____

Back 59

operating expense

Front 60

unpaid bonuses should be reported as

Back 60

current liability

Front 61

typical gain contingencies

Back 61

1. possible receipts of monies from gifts, donations, asset sales

2. possible refunds from the govt in tax disputes

3. pending court cases with a probable favorable outcome

4. tax loss carryforwards

Front 62

are gain contingencies recorded?

Back 62

no

Front 63

are gain contingencies disclosed?

Back 63

only if probability of receipt is high

Front 64

three areas of probability for loss contingencies

Back 64

probable

reasonably possible

remote

Front 65

what do you do when a loss contingency is probable?

Back 65

accrue (journal entry) and disclose in footnote

Front 66

what do you do when a loss contingency is reasonably possible?

Back 66

disclose in footnote

Front 67

what do you do when the possibility of a loss contingency is remote?

Back 67

ignore it

Front 68

accrual of loss contingencies increase which accounts?

Back 68

expense and liability

Front 69

4 common loss contingencies

Back 69

1. litigation, claims, and assessments

2. guarantee and warranty costs

3. premiums and coupons

4. environmental liabilities

Front 70

promise made by a seller to a buyer to make good on a deficiency of quantity, quality, or performance in a product

Back 70

guarantee and warranty costs

Front 71

cash basis method for guarantee/warranty costs

Back 71

expense warranty costs as incurred

Front 72

when does one use the cash basis method for guarantee/warranty costs?

Back 72

1. it is not probable that a liability has been incurred

2. it cannot reasonably estimate the amount of the liability

Front 73

accrual basis method for guarantee/warranty costs

Back 73

charge warranty costs to operating expense in the year of sale

Front 74

another name for the accrual basis method for guarantee/warranty costs

Back 74

expense warranty approach (liability account)

Front 75

is cash basis or accrual basis method the generally accepted for guarantee/warranty costs?

Back 75

accrual basis method