Chapter 13 Homework -...

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Chapter 13: Current Liabilities and Contingencies Tiffany Watt Homework January 24, 2011 AC 302 – 01   Questions 9) Under what conditions should a short-term obligation be excluded from current liabilities? A company is required to exclude a short-term obligation from current liabilities if both of the following terms are met: (1) it must intend to refinance the obligation on a long-term basis, and (2) it must demonstrate an ability to consummate the refinancing by actually refinancing the short-term obligation or entering into a financing agreement. 17) Define (a) a contingency and (b) a contingent liability. a. A contingency is “an existing condition, situation, or set of circumstances involving uncertainty as to possible gain (gain contingency) or loss (loss contingency) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur.” b. Contingent liabilities are liabilities that are incurred as a result of a loss contingency. 30) How does the acid-test ratio differ from the current ratio? How are they similar? The main difference between the acid-test ratio and the current ratio is that the acid-test ratio does not include inventories. The current ratio is the ratio of total current assets to total current liabilities. On the other hand, the acid-test ratio relates total current liabilities to cash, receivables and marketable
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This note was uploaded on 09/01/2011 for the course BUSINESS 101 taught by Professor - during the Spring '11 term at Mississippi Valley State University.

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Chapter 13 Homework -...

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