Balance Sheet and Current Liabilities

8274 Words Jan 20th, 2015 34 Pages
Ch8
Student: ___________________________________________________________________________

1.

Delta, Northwest, and United Airlines have all, at one time, filed for bankruptcy.
True

2.

In a classified balance sheet, we categorize all liabilities as current.
True

3.

False

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and paperwork.
True

9.

False

We record interest expense in the period in which we pay it, rather than in the period we incur it.
True

8.

False

Interest is stated in terms of a percentage rate to be applied to the face value of the loan.
True

7.

False

When a company borrows cash from a bank promising to repay the
…show more content…
True

False

30. Regarding a contingent liability, when no amount within a range of potential losses appears more likely than others, we record the maximum amount in the range.
True

False

31. If the likelihood of a loss is reasonably possible rather than probable, we record no entry, but make full disclosure in a footnote to the financial statements to describe the contingency.
True

False

32. If the likelihood of loss is remote, disclosure usually is not required.
True

False

33. A contingent liability is recorded only if a loss is at least reasonably possible and the amount can be reasonably estimated.
True

False

34. The balance in the Warranty Liability account is always equal to Warranty Expense.
True

False

35. A gain contingency is an existing uncertain situation that might result in a gain, which often is the flip side of loss contingencies.
True

False

36. We record gain contingencies when the gain is probable and can be reasonably estimated.
True

False

37. A company is said to be liquid if it has sufficient cash to pay currently maturing debts.
True

False

38. The current ratio is calculated by dividing current liabilities by current assets.
True

False

39. The acid-test ratio, or quick ratio, is similar to the current ratio but is based on a more conservative measure of current assets available to pay current liabilities.
True

False

40. Quick assets include only cash, short-term investments, and accounts
Open Document