Question 1

The withholding of taxes from an employee's pay is a liability to the company.

Accepted Answer

The company is responsible for collecting and remitting taxes withheld from an employee's pay to the government on the employee's behalf, making it a liability for the company until the taxes are remitted.

Question 2

An amortization table for a note payable shows decreasing amounts of interest and an increasing amount of unpaid balance each period.

Accepted Answer

An amortization table for a note payable shows decreasing amounts of interest and an increasing amount of principal being paid each period, while the unpaid balance decreases.

Question 3

Since payment is due within one year,the current portion of long-term debt should be reported separately in the long-term liabilities section of the balance sheet.

Accepted Answer

The current portion of long-term debt due within one year should be reported as a current liability, not in the long-term liabilities section of the balance sheet.

Question 4

The unpaid balance column on an amortization table for a note payable shows the amount the debtor could pay to settle the liability at a particular point in time.

Accepted Answer

The unpaid balance column on an amortization table represents the amount of principal remaining on a loan at a given point in time, not the amount the debtor could pay to settle the liability. However, the unpaid balance can be used to determine the amount needed to pay off the loan in full.

Question 5

Dividends paid by a corporation to its stockholders are tax deductible by the corporation but interest paid on bonds is not tax deductible.

Accepted Answer

Dividends paid by a corporation to its stockholders are not tax deductible for the corporation, whereas interest paid on bonds is tax deductible.

Question 6

Junk bonds are attractive to investors because they carry a high rate of interest and are convertible into a specified number of shares of capital stock.

Accepted Answer

Junk bonds are attractive to investors primarily because they offer higher interest rates to compensate for their higher risk of default, not because they are convertible into shares of capital stock. Convertibility is a feature of convertible bonds, which are a different financial instrument.

Question 7

Worker's compensation premiums are deducted from each employee's gross pay.

Accepted Answer

Worker's compensation premiums are paid entirely by the employer, not deducted from the employee's gross pay.

Question 8

The amount of FICA tax and Medicare tax withheld from an employee is used to pay the employer's percentage of the tax and is mailed to the government quarterly.

Accepted Answer

The amount of FICA tax and Medicare tax withheld from an employee, along with the employer's matching contribution, is indeed sent to the government, but the withheld amounts are not used to pay the employer's portion. Both the employee and the employer contribute separately to FICA and Medicare taxes.

Question 9

Gross pay less withholding tax and less worker's compensation is considered net pay.

Accepted Answer

The answer of Gross pay less withholding tax and less...

Question 10

Working capital is equal to current assets less current liabilities.

Accepted Answer

This is the definition of working capital. Working capital measures a company's ability to meet its short-term financial obligations. It is calculated as the difference between a company's current assets and its current liabilities.

Question 11

Bonds secured by a pledge of specific assets are called debenture bonds.

Accepted Answer

Bonds secured by a pledge of specific assets are called secured bonds or mortgage bonds, while debenture bonds are unsecured bonds that rely on the general creditworthiness of the issuer.

Question 12

Current liabilities are obligations that must be repaid within the shorter of one year or the operating cycle.

Accepted Answer

The answer of Current liabilities are obligations that must be...

Question 13

If a long-term debt is to be paid off in monthly installments over a 5-year period,the entire principal should be classified as a long-term debt.

Accepted Answer

The portion of the debt that is due within the next 12 months should be classified as a current liability, while the remainder is classified as long-term debt.

Question 14

When a company sells bonds,the bondholders are permitted to vote for the board of directors.

Accepted Answer

Bondholders do not have voting rights for the board of directors. Only shareholders have the right to vote for the board of directors.

Question 15

Accounts payable are often subdivided into the categories of trade accounts payable and notes payable.

Accepted Answer

The answer of Accounts payable are often subdivided into the...

Question 16

When bonds are sold by one investor to another,they sell at market price plus accrued interest since the last payment date.

Accepted Answer

When a bond is sold in the secondary market, the buyer pays the market price of the bond plus the accrued interest since the last interest payment date, which is typically prorated based on the number of days since the last payment.

Question 17

A liability that is known to exist but the precise dollar amount is not known is called a possible liability.

Accepted Answer

A liability that is known to exist but the precise dollar amount is not known is called an estimated liability. Possible liabilities are referred to as contingent liabilities, which may become actual liabilities depending on the outcome of a future event.

Question 18

Federal unemployment taxes apply to a set dollar amount of employee wages and tend to decline dramatically as the year progresses.

Accepted Answer

Federal unemployment taxes are based on a wage base limit, which is a set dollar amount of wages per employee per year. Once wages exceed this limit, the employer is no longer required to pay FUTA taxes on that employee for the remainder of the year. As a result, FUTA taxes tend to decline as the year progresses and more employees reach the wage base limit.

Question 19

The most common types of payroll deductions are taxes,insurance premiums,employee savings,and union dues.

Accepted Answer

The answer of The most common types of payroll deductions...

Question 20

When money is borrowed by issuing a note payable,the borrower records a liability equal to the maturity value of the note.

Accepted Answer

The borrower records a liability equal to the principal amount of the note payable at the time of borrowing, not the maturity value. The maturity value, which includes any interest, is recognized over the term of the loan.

Quiz 10: Liabilities