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.

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

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

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.

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