Question Details

If a short-term obligation is excluded from current liabilities 



1.	Which of the following statements is false?
a.	A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing.
b.	Cash dividends should be recorded as a liability when they are declared by the board of directors.
c.	Under the cash basis method, warranty costs are charged to expense as they are paid.
d.	FICA taxes withheld from employees' payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.

	2.	Which of the following is not a correct statement about sales taxes?
a.	Sales taxes are an expense of the seller.
b.	Many companies record sales taxes in the sales account.
c.	If sales taxes are included in the sales account, the first step to find the amount of sales taxes is to divide sales by 1 plus the sales tax rate.
d.	Sales Taxes Payable is classified as a current liability.

	3.	If a short-term obligation is excluded from current liabilities because of refinancing, the footnote to the financial statements describing this event should include all of the following information except
a.	a general description of the financing arrangement.
b.	the terms of the new obligation incurred or to be incurred.
c.	the terms of any equity security issued or to be issued.
d.	the number of financing institutions that refused to refinance the debt, if any.

	S4.	In accounting for compensated absences, the difference between vested rights and accumulated rights is that:
a.	vested rights are normally for a longer period of employment than are accumu¬lated rights.
b.	vested rights are not contingent upon an employee's future service.
c.	vested rights are a legal and binding obligation on the company, whereas accumulated rights expire at the end of the accounting period in which they arose.
d.	vested rights carry a stipulated dollar amount that is owed to the employee; accumulated rights do not represent monetary compensation.

	P5.	An employee's net (or take-home) pay is determined by gross earnings minus amounts for income tax withholdings and the employee's
a.	portion of FICA taxes and unemployment taxes.
b.	and employer's portion of FICA taxes, and unemployment taxes.
c.	portion of FICA taxes, unemployment taxes, and any union dues.
d.	portion of FICA taxes and any union dues.





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