ch9

Financial Accounting

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Unformatted text preview: ch9 Student: ___________________________________________________________________________ 1. When a liability is initially recorded, it is recorded at the future amount of all payments. True False 2. A current liability is always a short-term obligation expected to be paid within one year of the balance sheet date. True False 3. A quick ratio that is high according to an industry average might mean the company may have excessive inventory levels or slow moving inventory items. True False 4. The quick ratio can be manipulated by management through paying off current liabilities before the end of the accounting period. True False 5. Many strong companies intentionally create low quick ratios. True False 6. Quick assets include cash, accounts receivable, and inventory. True False 7. Selling inventory on account increases the quick ratio. True False 8. Purchasing inventory on account decreases the quick ratio. True False 9. A current liability is created when a customer pays cash for services to be provided in the future. True False 10. Purchasing inventory on account increases the accounts payable turnover ratio. True False 11. The choice of inventory method has an impact on the accounts payable turnover ratio. True False 12. The accounts payable turnover ratio is calculated by dividing accounts payable by cash payments to suppliers. True False 13. Income taxes payable is an example of an accrued liability. True False 14. The accounts payable turnover ratio is difficult to manipulate. True False 15. The accrual of interest on a short-term note payable decreases both the quick ratio and current assets. True False 16. The FICA (social security) tax is a matching tax with a portion paid by both the employer and the employee. True False 17. A company borrowed $100,000 at 6% interest on September 1, 2009. Assuming no adjusting entries have been made during the year, the entry to record interest accrued on December 31, 2009 would include a debit to interest expense and a credit to interest payable for $2,000. True False 18. An estimated liability can't be reported on the balance sheet. True False 19. A contingent liability is reported on the balance sheet if it is probable and can be estimated. True False 20. A contingent liability is disclosed in a note to the financial statements when the liability is reasonably possible and can be estimated. True False 21. The journal entry to record a contingent liability creates an accrued liability on the balance sheet and a loss on the income statement. True False 22. A contingent liability can't be disclosed in a note to the financial statements unless it can be estimated....
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