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Using Financial Accounting Information The Alternative to Debits and Credits 10e Gary A Porter Curtis L Norton

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  • ISBN-10 ‏ : ‎ 1337276332
  • ISBN-13 ‏ : ‎ 978-1337276337

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Using Financial Accounting Information The Alternative to Debits and Credits 10e Gary A Porter Curtis L Norton

True / False

1. A note payable due in two years is a current liability.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

2. The current maturity of long-term debt is a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

3. A note payable that is due in six months is a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

4. If a bank discounts a note, then the borrower needs to only pay the cash received and not the face value of the note.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

5. A remotely possible loss from a lawsuit is not reported on the balance sheet as a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

6. Discount on Notes Payable is treated as a reduction of notes payable on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

7. For users of financial statements, the current liability classification in the balance sheet is important because it is most closely tied to the concept of profitability.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

8. When a liability is accrued, the account debited in the transaction is a stockholders’ equity account.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

9. U.S. standards require a classified balance sheet, but international accounting standards do not require companies to present classified balance sheets with liabilities classified as either current or long term.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

10. Accrued wages is a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

11. Income taxes payable is a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

12. A company gives a two-year warranty for its product. The estimated liability for product warranties for the upcoming year is a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

13. Income taxes payable are recognized as an expense once they are paid to the respective government or taxing authority.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

14. An amount that has been incurred as an expense, but has not yet been paid should be considered an accrued liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

15. International accounting standards require companies to present classified balance sheets with liabilities classified as either current or long term.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

16. Generally, an increase in a current liability results in an increase in the Operating Activities category of the cash flow statement.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 410-411
LEARNING OBJECTIVES: FACC.PONO.18.09-03 – LO: 09-03
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Remembering

17. In the statement of cash flows, a decrease in accounts payable would be shown as an increase in the Operating Activities category.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 410-411
LEARNING OBJECTIVES: FACC.PONO.18.09-03 – LO: 09-03
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

18. In the statement of cash flows, an increase in a current liability will appear as an increase in the Financing category.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 410-411
LEARNING OBJECTIVES: FACC.PONO.18.09-03 – LO: 09-03
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

19. Estimated liability for product warranties to be paid in the upcoming year is a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

20. Warranty expenses are the result of the selling company’s estimate of the number of units sold during the current year that may become defective and need repair or replacement during the warranty period.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

21. When a company uses coupon or premium offers in conjunction with the sale of its products, there is no need to record any contingent liability.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

22. Curtain Corp. stands to receive a sufficient cash settlement from a lawsuit. Curtain needs to record this on its accounting records.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Applying

23. Advance ticket sales for a concert next month are a current liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

24. The liability for a premium offer estimated to be redeemed is not a current liability.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

25. A contingent liability is recorded if it is probable and can be reasonably estimated.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

26. For a given contingent liability, a company has the choice of either recording it on the balance sheet or disclosing it in the notes.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

27. The terms referring to contingencies differ between U.S. GAAP and IFRS.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

28. International accounting standards use the term provision for those contingent items that must be recorded on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

29. Contingent assets may be disclosed in the notes if probable and reasonably estimable.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 411-415
LEARNING OBJECTIVES: FACC.PONO.18.09-04 – LO: 09-04
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

30. Accountants need not worry about calculations based on the concept of the time value of money.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 415-416
LEARNING OBJECTIVES: FACC.PONO.18.09-05 – LO: 09-05
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

31. Compound interest is a repeated calculation of the interest only on the principal over certain periods of time.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 415-416
LEARNING OBJECTIVES: FACC.PONO.18.09-05 – LO: 09-05
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Remembering

32. Simple interest on a loan can be calculated by multiplying the principal by the annual interest rate expressed as a percentage of the time in years or a fraction of the time in years.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 415-416
LEARNING OBJECTIVES: FACC.PONO.18.09-05 – LO: 09-05
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Remembering

33. If the annual interest is 12%, but the compounding is done quarterly, then the interest rate is 4% per period.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 415-416
LEARNING OBJECTIVES: FACC.PONO.18.09-05 – LO: 09-05
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Understanding

34. $2,000 invested today at 12% with compound interest will yield $2,480 in two years.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 415-416
LEARNING OBJECTIVES: FACC.PONO.18.09-05 – LO: 09-05
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Analyzing

35. When borrowing money to be repaid in regular future payments, the payment is based on the present value of the loan, the interest rate, and the length of the loan.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 416-421
LEARNING OBJECTIVES: FACC.PONO.18.09-06 – LO: 09-06
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

36. The present value is the value today of a single amount to be paid or received at a specific date in the future.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 416-421
LEARNING OBJECTIVES: FACC.PONO.18.09-06 – LO: 09-06
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Remembering

37. An annuity is a series of equal payments made at equal intervals in the future.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 416-421
LEARNING OBJECTIVES: FACC.PONO.18.09-06 – LO: 09-06
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Remembering

38. If you plan to invest $10,000 and want to determine how much will be accumulated in six years if you earn interest at 7% per year, you would calculate this using the future value of an annuity.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
REFERENCES: pp. 416-421
LEARNING OBJECTIVES: FACC.PONO.18.09-06 – LO: 09-06
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Analyzing

39. In a compound interest problem, if you know the future value, the present value, and the number of periods, then you can solve for the interest rate.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
REFERENCES: pp. 421-422
LEARNING OBJECTIVES: FACC.PONO.18.09-07 – LO: 09-07
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Understanding

Multiple Choice

40. Redfern Company has current assets of $150,000 and current liabilities of $60,000. How much inventory could it purchase on account and achieve its minimum desired current ratio of 2 to 1?
a. $10,000
b. $20,000
c. $30,000
d. $40,000
ANSWER: c
RATIONALE: $150,000 + X = ($60,000 + X) × 2
X = $30,000

DIFFICULTY: Moderate
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Analytic
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Measurement
KEYWORDS: Bloom’s: Analyzing

41. All of the following are characteristics of current liabilities except
a. they may be replaced with a new short-term liability rather than being paid in cash.
b. they may involve estimated amounts.
c. they are due within one year or within the operating cycle, whichever is longer.
d. All three of these are characteristic of current liabilities.
ANSWER: d
DIFFICULTY: Moderate
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

42. Which of the following accounts is not classified as a current liability?
a. Note payable, due in three years
b. Taxes payable
c. Salaries payable
d. Accounts payable
ANSWER: a
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

43. Which of the following is not classified as a noncurrent liability?
a. Bonds payable
b. Capital lease obligations
c. Current portion of long-term debt
d. Mortgage payable
ANSWER: c
DIFFICULTY: Easy
REFERENCES: pp. 408-409
LEARNING OBJECTIVES: FACC.PONO.18.09-02 – LO: 09-02
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

44. Current liabilities are defined as those liabilities that will be satisfied
a. by the end of the operating cycle.
b. within one year.
c. within one year or within the operating cycle, whichever is longer.
d. within one year or within the operating cycle, whichever is shorter.
ANSWER: c
DIFFICULTY: Moderate
REFERENCES: pp. 404-408
LEARNING OBJECTIVES: FACC.PONO.18.09-01 – LO: 09-01
NATIONAL STANDARDS: United States – BUSPROG: Communications
ACCREDITING STANDARDS: ACBSP: APC-16-Current Liabilities
AICPA: FN-Reporting
KEYWORDS: Bloom’s: Understanding

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