Question 1

Which of the following best describes a current liability?

Accepted Answer

A debt payable in cash within one year or one operating cycle.

Question 2

A company has Cost of Goods Sold (COGS) of $$1,200,000 and average accounts payable of 200$$,000. What is its accounts payable turnover ratio? Use the formula $$	ext{Accounts Payable Turnover} = \frac{	ext{COGS}}{	ext{Average Accounts Payable}}.$$

Accepted Answer

$$6$$

Question 3

Which of the following is NOT typically classified as a current liability?

Accepted Answer

Bonds payable due in 5 years.

Question 4

A company borrows $$8,000 on January 1, 2024, by signing a one-year, 10% note payable. What amount of interest expense should be accrued on September 30, 2024, if the fiscal year ends on that date? Use $$	ext{Interest} = 	ext{Principal} 	imes 	ext{Rate} 	imes \frac{	ext{Months}}{12}$.

Accepted Answer

$$600$$

Question 5

Which of the following best describes the current portion of long-term debt?

Accepted Answer

The principal amount of long-term debt due within one year.

Question 6

On June 30, 2024, Amazon.com collects $3 million in cash for 1-year memberships to Amazon Prime. What is the correct journal entry at the time of collection?

Accepted Answer

Debit Cash $$3,000,000; Credit Unearned Revenue 3$$,000,000

Question 7

A company estimates that warranty costs will be 3% of sales. If sales are $$100,000, what is the warranty expense for the year? Use $$	ext{Warranty Expense} = 	ext{Sales} 	imes 	ext{Estimated Percentage}$.

Accepted Answer

$$3,000$$

Question 8

Which of the following is an example of a contingent liability?

Accepted Answer

A potential obligation from a pending lawsuit.

Question 9

According to FASB guidelines, when should a company accrue a contingent liability?

Accepted Answer

When it is probable the loss will occur and the amount can be reasonably estimated.

Question 10

A company records a $$10,000 salary expense. Employee income tax withheld is 1$$,200 and employee FICA tax withheld is $$800. What is the total payroll cost to the company, including employer FICA tax? Use $$	ext{Total Payroll Cost} = 	ext{Salary Expense} + 	ext{Employer FICA}$.

Accepted Answer

$$10,800$$

Question 11

If a company’s accounts payable turnover ratio is $$8$$, how many days on average does it take to pay its accounts payable? Use $$	ext{Days Payable} = \frac{365}{	ext{Turnover Ratio}}.$$

Accepted Answer

$$45.6$$ days

Question 12

Which of the following is a benefit of using robotic process automation (RPA) in the accounts payable process?

Accepted Answer

It reduces errors in invoice entry and creates a complete log for audit.

Question 13

A company collected $$210,000 in cash from sales, including 10$$,000 in sales tax. What is the correct journal entry for the sales tax portion?

Accepted Answer

Credit Sales Tax Payable $10,000

Question 14

Which of the following best describes unearned revenue?

Accepted Answer

Cash received before goods or services are provided.

Question 15

If a company estimates $$3,000 in warranty expense but only 2$$,800 in actual warranty costs are incurred, what is the balance in Accrued Warranties Payable after replacements?

Accepted Answer

$$200$$

Question 16

Which of the following is NOT a step typically performed by an accounts payable bot?

Accepted Answer

Approving exceptions without human review.

Question 17

A company has a pending lawsuit. The legal team believes it is reasonably possible, but not probable, that the company will lose and cannot estimate the amount. According to FASB, what should the company do?

Accepted Answer

Disclose the contingency in a financial statement note.

Question 18

Which of the following is an example of an accrued liability?

Accepted Answer

Accrued wages payable.

Question 19

Which of the following would NOT be considered a payroll liability?

Accepted Answer

Accounts receivable from customers.

Question 20

A company issues a $$10,000, 1-year note payable at 8% interest. What is the total amount to be paid at maturity? Use $$	ext{Total Payment} = 	ext{Principal} + (	ext{Principal} 	imes 	ext{Rate})$.

Accepted Answer

$$10,800$$

Current and Contingent Liabilities – Financial Accounting Study Notes

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