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Exam 9: Reporting and Interpreting Liabilities

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Question 61

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Which of the following is incorrect?

A) Current liabilities are those that will be satisfied within one year or the operating cycle, whichever is longer.
B) Liquidity is the ability of the company to meet its total obligations.
C) Current liabilities impact a company's liquidity.
D) Working capital is equal to current assets minus current liabilities.

E) All of the above
F) A) and B)

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Question 62

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A company's income statement reported income tax expense of $200,000 during 2014. The deferred tax liability on the balance sheet increased $20,000 during 2014. How much was the company's tax liability during 2014?

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Question 63

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Miranda Company borrowed $100,000 cash on September 1, 2014, and signed a one-year 6%, interest-bearing note payable. Assume no adjusting entries have been made during the year. Which of the following would be the required adjusting entry at the end of the December 31, 2014 accounting period?

Which of the following transactions will decrease the accounts payable turnover ratio?

Rae Company purchased a new vehicle by paying $10,000 cash on the purchase date and agreeing to pay $3,000 every three months during the next five years. The first payment is due three months after the purchase date. Rae's incremental borrowing rate is 12%. The liability reported on the balance sheet as of the purchase date, after the initial $10,000 payment was made, is closest to:

The FICA (social security) tax is a matching tax with a portion paid by both the employer and the employee.

Answer each of the independent problems (show computations): A. Company A deposited $20,000 in a savings account on January 1, 2013, that will accumulate 6% interest each December 31. 1. What will be the savings balance as of December 31, 2017? 2. How much interest will be earned as of December 31, 2017? B. Company B needs to accumulate a $50,000 fund by making five equal annual deposits. Assuming a 7% interest accumulation, how much must be deposited at the end of each year? C. Company C has a new machine that has an estimated life of five years and a $5,000 residual value at the end of that life. Assuming an 8% interest rate, what is the present value of the estimated residual value? D. Company D owes a $50,000 debt that is now due (January 1, 2015). Arrangements have been made to pay it off in five equal annual installments starting December 31, 2015 (an ordinary annuity situation).

Which of the following is correct?

Working capital increases when a company purchases equipment and signs a 2-year note payable.

A contingent liability is reported on the balance sheet if it is probable and can be estimated.

Accounts payable and accrued liabilities are interchangeable account titles.

Phipps Company borrowed $25,000 cash on October 1, 2014, and signed a nine-month, 8% interest-bearing note payable with interest payable at maturity. Assuming that adjusting entries have not been made during the year, the amount of accrued interest payable to be reported on the December 31, 2014 balance sheet is which of the following?

Working capital is a measure of short-run liquidity and is measured by dividing current assets by current liabilities.