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Multiple choice -current assets and current liabililities

Please highlight the correct answer
51. The relationship between current liabilities and current assets is
a. useful in determining income.
b. useful in evaluating a company's liquidity.
c. called the matching principle.
d. useful in determining the amount of a company's long-term debt.
52. Most companies pay current liabilities
a. out of current assets.
b. by issuing interest-bearing notes payable.
c. by issuing stock.
d. by creating long-term liabilities.
53. A current liability is a debt that can reasonably expected to be paid
a. within one year.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.
54. Liabilities are classified on the balance sheet as current or
a. deferred.
b. unearned.
c. long-term.
d. accrued.
55. From a liquidity standpoint, it is most desirable for a company to have current
a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.
56. The relationship of current assets to current liabilities is used in evaluating a company's
a. operating cycle.
b. revenue-producing ability.
c. short-term debt paying ability.
d. long-range solvency.
57. Which of the following is usually not an accrued liability?
a. Interest payable
b. Wages payable
c. Taxes payable
d. Notes payable
58. With an interest-bearing note, the amount of assets received upon issuance of the note is generally
a. equal to the note's face value.
b. greater than the note's face value.
c. less than the note's face value.
d. equal to the note's maturity value.
Use the following information for questions 59 - 61.
Chase County Bank agrees to lend Agler Brick Company $300,000 on January 1. Agler Brick Company signs a $300,000, 8%, 9-month note.
59. The entry made by Agler Brick Company on January 1 to record the proceeds and issuance of the note is
a. Interest Expense 18,000
Cash. 282,000
Notes Payable 300,000
b. Cash 300,000
Notes Payable 300,000
c. Cash 300,000
Interest Expense 18,000
Notes Payable 318,000
d. Cash 300,000
Interest Expense 18,000
Notes Payable 300,000
Interest Payable 18,000
60. What is the adjusting entry required if Agler Brick Company prepares financial statements on June 30?
a. Interest Expense 12,000
Interest Payable 12,000
b. Interest Expense 12,000
Cash 12,000
c. Interest Payable 12,000
Cash 12,000
d. Interest Payable 12,000
Interest Expense 12,000
61. What entry will Agler Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?
a. Notes Payable 318,000
Cash 318,000
b. Notes Payable 300,000
Interest Payable 18,000
Cash 318,000
c. Interest Expense 18,000
Notes Payable 300,000
Cash 318,000
d. Interest Payable 12,000
Notes Payable 300,000
Interest Expense 6,000
Cash 318,000
62. As interest is recorded on an interest-bearing note, the Interest Expense account is
a. increased; the Notes Payable account is increased.
b. increased; the Notes Payable account is decreased.
c. increased; the Interest Payable account is increased.
d. decreased; the Interest Payable account is increased.
Use the following information for questions 63 - 64.
On October 1, Steve's Carpet Service borrows $50,000 from National Bank on a 3-month, $50,000, 8% note.
63. What entry must Steve's Carpet Service make on December 31 before financial statements are prepared?
a. Interest Payable 1,000
Interest Expense 1,000
b. Interest Expense 4,000
Interest Payable 4,000
c. Interest Expense 1,000
Interest Payable 1,000
d. Interest Expense 1,000
Notes Payable 1,000
64. The entry by Steve's Carpet Service to record payment of the note and accrued interest on January 1 is
a. Notes Payable 51,000
Cash 51,000
b. Notes Payable 50,000
Interest Payable 1,000
Cash 51,000
c. Notes Payable 50,000
Interest Payable 4,000
Cash 54,000
d. Notes Payable 50,000
Interest Expense 1,000
Cash 51,000
65. Interest expense on an interest-bearing note is
a. always equal to zero.
b. accrued over the life of the note.
c. only recorded at the time the note is issued.
d. only recorded at maturity when the note is paid.
66. The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is
a. Notes Payable
Interest Payable
Cash
b. Notes Payable
Interest Expense
Cash
c. Notes Payable
Cash
d. Notes Payable
Cash
Interest Payable

67. Sales taxes collected by a retailer are recorded by
a. crediting Sales Taxes Revenue.
b. debiting Sales Taxes Expense.
c. crediting Sales Taxes Payable.
d. debiting Sales Taxes Payable.
68. Unearned Rental Revenue
a. is a contra account to Rental Revenue.
b. is a revenue account.
c. is reported as a current liability.
d. is debited when rent is received in advance.
69. The amount of sales tax collected by a retail store when making sales is
a. a miscellaneous revenue for the store.
b. a current liability.
c. not recorded because it is a tax paid by the customer.
d. recorded as an operating expense.
70. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales account amounted to $168,000, what is the amount of the sales taxes owed to the taxing agency?
a. $160,000.
b. $168,000.
c. $8,400.
d. $8,000.
71. The current portion of long-term debt should
a. be paid immediately.
b. be reclassified as a current liability.
c. be classified as a long-term liability.
d. not be separated from the long-term portion of debt.
72. Sales taxes collected by a retailer are expenses
a. of the retailer.
b. of the customers.
c. of the government.
d. that are not recognized by the retailer until they are submitted to the government.
73. A retailer that collects sales taxes is acting as an agent for the
a. wholesaler.
b. customer.
c. taxing authority.
d. chamber of commerce.
74. Sales taxes collected by a retailer are reported as
a. contingent liabilities.
b. revenues.
c. expenses.
d. current liabilities.

75. A cash register tape shows cash sales of $3,000 and sales taxes of $150. The journal entry to record this information is
a. Cash 3,000
Sales 3,000
b. Cash 3,150
Sales Tax Revenue 150
Sales 3,000
c. Cash 3,000
Sales Tax Expense 150
Sales 3,150
d. Cash 3,150
Sales 3,000
Sales Taxes Payable 150

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Please highlight the correct answer
51. The relationship between current liabilities and current assets is
a. useful in determining income.
b. useful in evaluating a company's liquidity.
c. called the matching principle.
d. useful in determining the amount of a company's long-term debt.

Answer:
b. useful in evaluating a company's liquidity.

52. Most companies pay current liabilities
a. out of current assets.
b. by issuing interest-bearing notes payable.
c. by issuing stock.
d. by creating long-term liabilities.

Answer:
a. out of current assets.

53. A current liability is a debt that can reasonably expected to be paid
a. within one year.
b. between 6 months and 18 months.
c. out of currently recognized revenues.
d. out of cash currently on hand.

Answer:
a. within one year.

54. Liabilities are classified on the balance sheet as current or
a. deferred.
b. unearned.
c. long-term.
d. accrued.

Answer:
c. long-term.

55. From a liquidity standpoint, it is most desirable for a company to have current
a. assets equal current liabilities.
b. liabilities exceed current assets.
c. assets exceed current liabilities.
d. liabilities exceed long-term liabilities.

Answer:
c. assets exceed current liabilities.

56. The relationship of current assets to current liabilities is used in evaluating a company's
a. operating cycle.
b. revenue-producing ability.
c. short-term debt paying ability.
d. long-range solvency.

Answer:
c. short-term debt paying ability.

57. Which of the following is usually not an accrued liability?
a. Interest payable
b. Wages payable
c. Taxes payable
d. Notes payable
Answer:
d. Notes payable

58. With an interest-bearing note, the amount of assets received upon issuance of the note is generally
a. equal to the note's face value.
b. greater than the note's face value.
c. less than the note's face value.
d. equal to the note's ...

Solution Summary

The solution contains answers and explanations to 25 multiple choice questions on current assets and current liabilities

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