Fundamental Accounting Principles 24th Edition By John Wild – Test Bank

Chapter 11 Current Liabilities and Payroll Accounting

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

Answer: TRUE
Difficulty: 1 Easy
Topic: Defining Liabilities
Learning Objective: 11-C1 Describe current and long-term liabilities and their characteristics.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

2) Liabilities not due within one year or the company’s operating cycle, whichever is longer, are reported as current liabilities.

Answer: FALSE
Difficulty: 1 Easy
Topic: Defining Liabilities
Learning Objective: 11-C1 Describe current and long-term liabilities and their characteristics.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

3) All expected future payments are liabilities.

Answer: FALSE
Difficulty: 2 Medium
Topic: Defining Liabilities
Learning Objective: 11-C1 Describe current and long-term liabilities and their characteristics.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

4) A liability cannot be divided between current and noncurrent liabilities.

Answer: FALSE
Difficulty: 1 Easy
Topic: Defining Liabilities
Learning Objective: 11-C1 Describe current and long-term liabilities and their characteristics.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

5) A company cannot have a liability if the amount of the obligation is unknown.

Answer: FALSE
Difficulty: 1 Easy
Topic: Defining Liabilities
Learning Objective: 11-C1 Describe current and long-term liabilities and their characteristics.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

6) A liability may exist even if there is uncertainty about whom to pay, when to pay, or how much to pay.

Answer: TRUE
Difficulty: 1 Easy
Topic: Defining Liabilities
Learning Objective: 11-C1 Describe current and long-term liabilities and their characteristics.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

7) Trade accounts payable (or accounts payable) are amounts owed to suppliers for products or services purchased on credit.

Answer: TRUE
Difficulty: 1 Easy
Topic: Current Known Liabilities
Learning Objective: 11-C2 Identify and describe known current liabilities.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

8) Unearned revenues are amounts received in advance from customers for future products or services.

Answer: TRUE
Difficulty: 1 Easy
Topic: Current Known Liabilities
Learning Objective: 11-C2 Identify and describe known current liabilities.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

9) Sales Taxes Payable is debited and Cash is credited when companies send sales taxes collected from customers to the government.

Answer: TRUE
Difficulty: 2 Medium
Topic: Current Known Liabilities
Learning Objective: 11-C2 Identify and describe known current liabilities.
Bloom’s: Understand
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making

10) Vacation benefits is an example of a known liability.

Answer: FALSE
Difficulty: 1 Easy
Topic: Current Known Liabilities
Learning Objective: 11-C2 Identify and describe known current liabilities.
Bloom’s: Remember
AACSB/Accessibility: Communication / Keyboard Navigation
AICPA: BB Industry; FN Decision Making