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Exam 2: Current Liabilities

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Question 41

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An estimated liability

A) Is an unknown liability of a certain amount
B) Can be the result of a lawsuit
C) Is a liability that may occur if a future event occurs
D) Is a known obligation of an uncertain amount
E) None of these

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Question 42

Multiple Choice

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Gross pay is

A) Take-home pay
B) Deductions withheld by an employer
C) Salaries after taxes are deducted
D) Total compensation earned by an employee
E) The amount of the pay cheque

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Question 43

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A contingent liability

A contingent liability exists when a potential liability that depends on a future event arising out of a past transaction liability is either not probable or it cannot be reliably estimated.

On June 5,BB Company borrowed $120,000 from AH Bank.The loan had an interest rate of 10% and was due in 90 days.BB Company's fiscal year-end is December 31.Prepare the journal entry to record the receipt of the cash.

A gift card is an example of a contingent liability.

Liabilities

Vella Physio Company is located in Ponoka,Alberta and is a retailer of physio supplies.Beginning inventory is $20,000,and Vella uses the perpetual inventory system.Complete the journal entries on the following dates,including 5% GST as applicable.

Long-term liabilities are obligations of a company requiring payment within one year.

Obligations not expected to be paid within one year are reported as

Fees accepted in advance from a client

Major Company borrowed $12,000 by signing an 8% interest-bearing 45-day note payable to replace an overdue accounts payable.To record this transaction,Major Company should prepare a journal entry that includes a

A liability is a future payment of assets or services that a company is currently obligated to make as a result of past transactions or events.

On August 1,Droid Co.borrowed $80,000 from Simpli Financial.The loan had an interest rate of 7% and was due in 60 days.Prepare the journal entry for Droid Co.to record the note.

A long-term liability can have a current component.

Provincial sales tax payable:

Which of the following items below is recorded as an estimate when initially recognized?

All expected future payments are liabilities.

On July 16,Freedom Flight gave a 120-day note payable to Slick and Slide Co.,instead of cash payment of an overdue account.The amount of the note was $75,000 at an interest rate of 14%.Prepare the journal entry and determine the maturity date for Freedom Flight to record payment of the note.

Obligations due to be paid within one year or the company's operating cycle,whichever is longer,are