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1 - 1 The time period for classifying a liability as...

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1 The time period for classifying a liability as current is one year or the operating cycle, whichever is: (a) longer. (b) shorter. (c) probable. (d) possible. Answer: (a) longer 2 To be classified as a current liability, a debt must be expected to be paid: (a) out of existing current assets. (b) by creating other current liabilities. (c) within 2 years. (d) Either (a) or (b) Answer: (d) Either (a) or (b) 3 Corricten Company borrows $88,500 on September 1, 2010, from Harrington State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2010? (a) $2,655. (b) $3,540. (c) $4,425. (d) $10,620. Answer: (b) $3,540. 4 RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31: (a) neither the note payable nor the interest payable is a current liability. (b) the note payable is a current liability, but the interest payable is not. (c) the interest payable is a current liability but the note payable is not. (d) both the note payable and the interest payable are current liabilities.
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