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Multiple Choice: True False Answers

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45 views

Multiple Choice: True False Answers

Uploaded by

Carlo Paras
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Prepaid insurance should be included in the numerator when computing the acid-test (quick)

ratio.

19. Paying a current liability with cash will always reduce the current ratio.

20. Current liabilities are usually recorded and reported in financial statements at their full
maturity value.

True False Answers—Conceptual


Item Ans. Item Ans. Item Ans. Item Ans.
1. F 6. F 11. T 16. T
2. F 7. T 12. F 17. F
3. T 8. F 13. T 18. F
4. T 9. T 14. F 19. F
5. F 10. F 15. T 20. T

MULTIPLE CHOICE—Conceptual
21. Liabilities are
a. any accounts having credit balances after closing entries are made.
b. deferred credits that are recognized and measured in conformity with generally
accepted accounting principles.
c. obligations to transfer ownership shares to other entities in the future.
d. obligations arising from past transactions and payable in assets or services in the
future.

22. Which of the following is a current liability?


a. A long-term debt maturing currently, which is to be paid with cash in a sinking fund
b. A long-term debt maturing currently, which is to be retired with proceeds from a new
debt issue
c. A long-term debt maturing currently, which is to be converted into common stock
d. None of these

23. Which of the following is true about accounts payable?


1. Accounts payable should not be reported at their present value.
2. When accounts payable are recorded at the net amount, a Purchase
Discounts account will be used.
3. When accounts payable are recorded at the gross amount, a Purchase
Discounts Lost account will be used.
a. 1
b. 2
c. 3
d. Both 2 and 3 are true.
24. Among the short-term obligations of Lance Company as of December 31, the balance
sheet date, are notes payable totaling $250,000 with the Madison National Bank. These
are 90-day notes, renewable for another 90-day period. These notes should be
classified on the balance sheet of Lance Company as
a. current liabilities.
b. deferred charges.
c. long-term liabilities.
d. intermediate debt.

25. Which of the following is not true about the discount on short-term notes payable?
a. The Discount on Notes Payable account has a debit balance.
b. The Discount on Notes Payable account should be reported as an asset on the
balance sheet.
c. When there is a discount on a note payable, the effective interest rate is higher than
the stated discount rate.
d. All of these are true.

26. Which of the following may be a current liability?


a. Withheld Income Taxes
b. Deposits Received from Customers
c. Deferred Revenue
d. All of these

27. Which of the following items is a current liability?


a. Bonds (for which there is an adequate sinking fund properly classified as a long-term
investment) due in three months.
b. Bonds due in three years.
c. Bonds (for which there is an adequate appropriation of retained earnings) due in
eleven months.
d. Bonds to be refunded when due in eight months, there being no doubt about the
marketability of the refunding issue.

28. Which of the following should not be included in the current liabilities section of the
balance sheet?
a. Trade notes payable
b. Short-term zero-interest-bearing notes payable
c. The discount on short-term notes payable
d. All of these are included

29. Which of the following is a current liability?


a. Preferred dividends in arrears
b. A dividend payable in the form of additional shares of stock
c. A cash dividend payable to preferred stockholders
d. All of these

30. Stock dividends distributable should be classified on the


a. income statement as an expense.
b. balance sheet as an asset.
c. balance sheet as a liability.
d. balance sheet as an item of stockholders' equity.
31. Of the following items, the only one which should not be classified as a current liability is
a. current maturities of long-term debt.
b. sales taxes payable.
c. short-term obligations expected to be refinanced.
d. unearned revenues.

32. An account which would be classified as a current liability is


a. dividends payable in the company's stock.
b. accounts payable—debit balances.
c. losses expected to be incurred within the next twelve months in excess of the
company's insurance coverage.
d. none of these.

33. Which of the following is a characteristic

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