1. A liability has three essential characteristics, which of the following is not one of them?
a. It is a present obligation that entails settlement by probable future transfer or use of cash, goods or services
b. The obligation must be liquidated using cash, goods, or services that were earned by the entity in the performance of their normal business operation
c. The liability must be an unavoidable obligation
d. The transaction or other event creating the obligation must have already occurred
2. Current liabilities are:
a. Liabilities that are due and payable on the balance sheet date
b. Liabilities that may be paid ...view middle of the document...
The currently maturing portion of long-term debt should be classified as a current liability if:
a. The debt is to be converted in capital stock
b. The debt is to be refinanced on a long-term basis
c. The funds used to liquidate it are currently classified as a long-term investment on the balance sheet
d. The portion so classified will be liquidated within one year using current assets
6. An enterprise is required to exclude a short-term obligation from current liabilities if it intends to refinance the obligation on a long-term basis and:
a. The enterprise can demonstrate the ability to consummate the refinancing
b. The obligation is not a part of normal operations
c. It can demonstrate that a negative effect on working capital will result if it is not reclassified
d. The interest rate on the long-term obligation is not above the prime rate
7. Which of the following would not constitute evidence concerning the ability to consummate the refinancing of a short-term obligation?
a. Actual refinancing after the balance sheet date by issuance of a long-term obligation
b. A statement by the board of directors that refinancing is inevitable
c. Entering into a financing agreement that clearly permits refinancing on a long-term basis with terms that are readily determinable
d. Actual refinancing after the balance sheet date by issuance of equity securities
8. Hegel Corporation has $1,500,000 of short-term debt it expects to retire with proceeds from the sale of 50,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities?
9. If a short-term obligation is excluded from current liabilities because of refinancing, the footnote to the financial statements describing this event should include all of the following information except:
a. A general description of the financing arrangement
b. The terms of the new obligation incurred or to be incurred
c. The terms of any equity security issued or to be issued
d. The number of financing institutions that refused to refinance the debt, if any
10. Wiliams Co., which has a taxable payroll of $300,000, is subject to the FUTA tax of 6.2% and a state contribution rate of 5.5%. However, because of stable employment experience, the company’s state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Williams Co.?
11. In accounting for compensated absences, a company following the guidance in FASB Statement No. 43 would account for the...