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Chapter 13 DONE - CHAPTER 13-CURRENT LIABILITIES AND...

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CHAPTER 13-CURRENT LIABILITIES AND CONTINGENCIES F1. A zero-interest-bearing note payable that is issued at a discount will not result in any interest expense being recognized. F2. Dividends in arrears on cumulative preferred stock should be recorded as a current liability. T3. Magazine subscriptions and airline ticket sales both result in unearned revenues. T4. Discount on Notes Payable is a contra account to Notes Payable on the balance sheet. F5. All long-term debt maturing within the next year must be classified as a current liability on the balance sheet. F6. A short-term obligation can be excluded from current liabilities if the company intends to refinance it on a long-term basis. T7. Many companies do not segregate the sales tax collected and the amount of the sale at the time of the sale. F8. A company must accrue a liability for sick pay that accumulates but does not vest. T9. Companies report the amount of social security taxes withheld from employees as well as the companies’ matching portion as current liabilities until they are remitted. F10. Accumulated rights exist when an employer has an obligation to make payment to an employee even after terminating his employment. T11. Companies should recognize the expense and related liability for compensated absences in the year earned by employees. F12. Companies should accrue an estimated loss from a loss contingency if information available prior to the issuance of financial statements indicates that it is probable that a liability has been incurred. T13. A company discloses gain contingencies in the notes only when a high probability exists for realizing them. F14. The expected profit from a sales type warranty that covers several years should all be recognized in the period the warranty is sold. T15. The fair value of an asset retirement obligation is recorded as both an increase to the related asset and a liability. T16. The cause for litigation must have occurred on or before the date of the financial statements to report a liability in the financial statements. F17. Under the expense warranty approach, companies charge warranty costs only to the period in which they comply with the warranty. F18. Prepaid insurance should be included in the numerator when computing the acid-test (quick) ratio. F19. Paying a current liability with cash will always reduce the current ratio. T20. Current liabilities are usually recorded and reported in financial statements at their full maturity value. 21. Liabilities are d. obligations arising from past transactions and payable in assets or services in the future. 22. Which of the following is a current liability? 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.
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