Accounting Test Solutions

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Student: ___________________________________________________________________________


Some liabilities are not contractual obligations and may not be payable in cash. True False


Amounts withheld from employees in connection with payroll often represent liabilities to third parties. True False


A customer advance produces a liability that is satisfied when the product or service is provided. True False


Long-term debt that is callable by the creditor in the upcoming year should be classified as a current liability only if the debt is expected to be called. True False


The concept of substance over form influences the classification of obligations expected to be refinanced. True False

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1. Noninterestbearing notes 2. Loss contingencies 3. Committed lines of credit 4. Accounts payable 5. Pledging arrangements __ Use accounts receivable as collateral.__ __ Often require compensating balance.__ __ Only formal credit instrument is the invoice.__ __ Effective interest higher than stated interest.__ Recorded if probable and amount is known or__ reasonably estimable.__

21. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. Present value of interest plus present value__ of principal.__ __ Required for contingencies.__ __ Payable with current assets.__ Short-term debt to be refinanced__ with long-term bonds payable.__ __ Avoids registration with SEC.__

1. Current liabilities 2. Usual valuation of long-term liabilities 3. Disclosure notes 4. Long-term liabilities 5. Commercial paper

22. Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011. 1. Not reported 2. Disclosure note only 3. Liability 4. Liability A material gain contingent on a future event that appears__ exceedingly likely.__ A penalty assessment that probably will be asserted by__ the EPA, in which case a determinable payment is probable.__ Unassessed penalty with a reasonable possibility of being__ asserted, in which case a determinable payment is
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