Multiple Choice Questions 1. When a credit is made to the income taxes payable account related to

Question:

Multiple Choice Questions
1. When a credit is made to the income taxes payable account related to taxes withheld from an employee, the corresponding debit is made to:
a. Cash
b. Taxes Expense
c. Taxes Payable
d. Wages Expense
2. When should a contingent liability be recognized?
a. When the contingent liability is probable
b. When a reasonable estimation can be made
c. Neither A nor B
d. A and B
3. Which of the following is true?
a. A contingent liability should always be recorded in the footnotes to the A contingent liability should always be recorded within the A company can choose to record a contingent liability either within its or in the footnotes to the No journal entries or footnotes are necessary if the possibility of a contingent liability is remote.
4. ABC Advisors is being sued by a former customer. ABC’s lawyers say that it is possible, but not probable, that the company will lose the lawsuit and the trial should last approximately 18 more months. Should ABC lose, they will most likely have to pay approximately $750,000. How should this lawsuit be reported in the Current liability of $750,000 and Expense of $750,000.
b. Long-term liability of $750,000 and Expense of $750,000.
c. No effect on the or income statement, but described in the footnotes.
d. No disclosure is required.
5. Warranty expense is:
a. Recorded as it is incurred.
b. Capitalized as a warranty asset.
c. Recorded in the period of sale.
d. None of these.
6. To record warranties, the adjusting journal entry would be:
a. A debit to Warranty Liability and a credit to Cash.
b. A debit to Warranty Expense and a credit to Warranty Liability.
c. A debit to Warranty Expense and a debit to Cash.
d. A debit to Warranty Liability and a credit to Warranty Expense.
7. How is the current ratio calculated?
a. Cash flows from Operating Activities/Current Liabilities
b. Current Assets/Current Liabilities
c. (Cash + Marketable Securities)/Current Liabilities
d. (Cash + Marketable Securities + Accounts Receivable)/Current Liabilities
8. How is the cash ratio calculated?
a. (Cash + Marketable Securities)/Current Liabilities
b. Current Assets/Current Liabilities
c. Cash Flows from Operating Activities/Current Liabilities
d. (Cash + Marketable Securities + Accounts Receivable)/Current Liabilities
9. Which of the following transactions would cause the current ratio to increase (assuming the current ratio is currently greater than 1)?
a. Receiving money from a customer related to an Paying off a payable
c. Purchasing inventory on credit
d. Purchasing property, plant, and equipment for cash
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...