A contingent liability that is probable and can be reasonably estimated must be

• Disclosed.
• Paid.
• Recorded.
• Not disclosed.

Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record?

• Debit Cash, $5,000; Credit Notes Payable, $5,000.
• Debit Cash, $5,000; Credit Notes Receivable, $5,000.
• Debit Notes Payable, $5,000; Credit Cash, $5,000.
• Debit Notes Receivable, $5,000; Credit Cash, $5,000.

Which of the following is not a current liability?

• Deferred revenue to be earned in nine months.
• Current portion of long-term debt.
• An unused line of credit.
• Notes payable due in six months.

Express Jet borrows $100 million on October 1, 2021, for one year at 6% interest. For what amount does Express Jet report interest expense for the year ended December 31, 2022?

• $1.5 million.
• $6 million.
• $0.
• $4.5 million.

Suppose that Neuman Exploration Tours has filed a lawsuit against a competitor for an alleged trademark violation. At the end of the year, Neuman's attorney estimates that the company will likely win the lawsuit and be awarded between $1.5 and $2 million, with the most likely amount being $1.8 million. How much should Neuman record as a gain?

• $1.5 million.
• $0.
• $1.8 million.
• $2.0 million.

Aviation Systems sells its products with a three-year manufacturing warranty. The company's sales revenue is $600,000. Based on prior experience, the company estimates that warranty costs are 5% of sales revenue. Actual warranty costs related to these sales were $5,000 during the year. How much warranty expense should the company record this year?

• $30,000.
• $10,000.
• $25,000.
• $ 5,000.

Which of the following increases an employer's payroll costs?

• Employer's FICA contribution.
• FICA withholding from the employee.
• Federal income tax.
• State income tax.

Which of the following is paid by both the employee and the employer?

• FICA taxes.
• State unemployment taxes.
• Federal unemployment taxes.
• Personal income taxes.

Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably possible, a contingent liability should be

• Reported as a liability but not disclosed.
• Neither disclosed nor reported as a liability.
• Disclosed and reported as a liability.
• Disclosed but not reported as a liability.

Assuming a current ratio of 1.0 and an acid-test ratio of 0.75, how will the borrowing of cash to be paid back in five years affect each ratio?

• Increase the current ratio and increase the acid-test ratio.
• No change to the current ratio and decrease the acid-test ratio.
• Increase the current ratio and decrease the acid-test ratio.
• Decrease the current ratio and decrease the acid-test ratio.

Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably likely, a contingent liability should be:

• Reported as a liability but not disclosed.
• Neither disclosed or reported as a liability.
• Disclosed and reported as a liability.
• Disclosed but not reported as a liability.

If Speedy Travel, Inc. borrows $50 million on September 1 for one year at 9% interest, how much interest expense should it record by December 31 of that same year?

• $4.5 million.
• $0.
• $1.5 million.
• $3.0 million.

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should report the following adjusting entry at December 31, 20X1:

• Debit interest expense and credit interest payable, $12,000.
• Debit interest expense and credit cash, $4,000.
• Debit interest expense and credit cash, $12,000.
• Debit interest expense and credit interest payable, $4,000.

Which of the following isnotdeducted from an employee's salary?

• Employee portion of insurance and retirement payments.
• FICA taxes.
• Unemployment taxes.
• Income taxes.

The current ratio is:

• Cash, short-term investments, accounts receivable, and inventory divided by current liabilities.
• Current liabilities divided by current assets.
• Cash, short-term investments, and accounts receivable divided by current liabilities.
• Current assets divided by current liabilities.