Balance Sheet and Current Liabilities

Powerful Essays
Ch8
Student: ___________________________________________________________________________

1.

Delta, Northwest, and United Airlines have all, at one time, filed for bankruptcy.
True

2.

In a classified balance sheet, we categorize all liabilities as current.
True

3.

False

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit without having to follow formal loan procedures and paperwork.
True

9.

False

We record interest expense in the period in which we pay it, rather than in the period we incur it.
True

8.

False

Interest is stated in terms of a percentage rate to be applied to the face value of the loan.
True

7.

False

When a company borrows cash from a bank promising to repay the amount borrowed plus interest, the borrower reports its liability as notes payable.
True

6.

False

Given a choice, most companies would prefer to report a liability as current rather than long-term, because doing so may cause the firm to appear less risky.
True

5.

False

Commonly, current liabilities are payable within one year, and long-term liabilities are payable more than one year from now.
True

4.

False

False

If a company borrows from another company rather than from a bank, the note is referred to as commercial paper. True

False

10. Accounts payable are amounts the company owes to suppliers of merchandise or services that it has bought on credit.
True

False

11. Deductions from employee salaries in determining the amount of payroll checks include withholdings for federal and state income taxes, FICA taxes, and the employee portion of insurance and retirement contributions. True

False

12. All states impose a state income tax.
True

False

13. Companies are required by law to withhold federal and state income taxes from employees' paychecks and remit these taxes to the government.
True

False

14. The employer records amounts deducted from employee payroll as liabilities until it pays them to the
appropriate

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