1, Commonly, current liabilities are payable within one year and long-term liabi
ID: 2578162 • Letter: 1
Question
1, Commonly, current liabilities are payable within one year and long-term liabilities are payable more than one year from now. True or False
2, Given a choice, most companes would prefer to report a liability as current rather than long-term because it may cause the firm to appear less risky T or F
3, If company borrows from another company rather than from a bank, the note is referred to as commercial paper. T or F
4, Sales taxes collected from customers by seller are not an expense, instead they represent current liabilities payable to the govermant T or F
5, The balance in the estimated warranty liability account is always equal to warranty expense. T or F
6, We record gain contingencies when the gain is probable and can be reasonable estimated. T or F.
7, An employee has gross earning of $1,600 and withholding of $25 for income taxes, $5 for social security taxes and $3 for medicare taxes. The employer also pays a total of $5 for social securty and $3 for medicare taxes, $12 for SUTA. What is the total cost of this employer to the employer? Assume no other infomation.
Explanation / Answer
1)True.
Mostly ,Liabilites which are payable within one year is a current liability .all liabilities other current are non current.
2)False,
Companies would prefer to report liability as long term liability as it appears to be less risky .(current liability are more liquid )that is to pay within a year.
3)True.
If company borrows fromanother company other than bank ,the note is referred is commercial paper.
4)True
Sales tax collected at time of sale is a tax collected on behalf of customer to be deposited in govenment account therefore not an expense
5)False.
It is not necessary all of the warranty liability created results in expense as it is created on estimated basis which can be more or less than estimation.
6)False.
Gain contingency are not recorded on financial statement but given in notes to accounts if gain is probable and reasonably estimated.
7)cost to employer =gross wages +payroll tax paid by employer
=1600+5+3+12
= 1620
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