Multiple choice accounting

Contingent liabilities must be recorded if _____.

	the future event is probable and the amount owed can be reasonably estimated
	the future event is remote
	the future event is reasonably possible
	the amount owed cannot be reasonably estimated

Harvey Company is required by law to collect and remit sales taxes to the state. If Havey has $8,000 of cash sales that are subject to an 8% sales tax, what is the journal entry to record the cash sales?

	debit cash $8,000; credit sales $7,360; credit sales taxes payable $640
	debit sales taxes payable $640; debit cash $7,360; credit sales $8,000
	debit cash $8,640; credit sales $8,000; credit sales taxes payable $640
	debit accounts receivable $8,640; credit sales $8,000; credit sales taxes payable $640

Contingent liabilities can be _____.

	probable
	reasonably possible
	estimable
	all of the choices are correct

On December 1, Martin Company signed a 90-day, 6% note payable, with a face value of $5,000. What amount of interest expense is accrued at December 31 on the note?

	$0
	$25
	$50
	$75

Debt guarantees _____.

	are never disclosed in the financial statements
	are considered a contingent liability
	are a bad business practice
	are recorded as a liability even though it is highly unlikely that the original debtor will default

All of the following statements regarding uncertainty in liabilities are trueexcept which one?

	Liabilities can involve uncertainty in whom to pay.
	A company can have an obligation of a known amount to a known creditor, but not know when it must be paid.
	A company only records liabilities when it knows whom to pay, when to pay, and how much to pay.
	A company can be aware of an obligation, but not know how much will be required to settle it.

The Federal Insurance Contributions Act (FICA) requires each employer to file a _____.

	W-4
	Form 941
	Form 1040
	Form 1099

Estimated liabilities commonly arise from _____.

	warranties
	vacation benefits
	employee benefits
	all of the choices are correct

In the accounting records of a defendant, lawsuits _____.

	are estimated liabilities
	should always be recorded
	should always be disclosed
	should be recorded if payment for damages is probable and the amount can be reasonably estimated

All of the following statements regarding liabilities are trueexcept which one?

	A liability is a probable future payment of assets or services.
	Unearned future wages to be paid to employees should be recorded as liabilities.
	For a liability to be reported, it must be a present obligation that results from a past transaction or event, and requires a future payment of assets or services.