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Exam 9: Accounting for Current Liabilities and Payroll

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Question 51

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Vogel Company purchased $8,000 of equipment by making a $500 down payment and issuing a note for the remainder.As a result of this event,assets increased by $8,000.

A) True
B) False

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Question 52

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Houston Co.borrowed $20,000 from Dallas Co.on March 1,Year 1.Houston issued a note payable that had a one-year term and the annual interest rate is 8%.How will the necessary adjustment,dated December 31,Year 1,affect the elements of the Year 1 financial statements?

A) Increase liabilities and increase expenses
B) Increase assets and increase revenues
C) Increase assets and increase liabilities
D) No effect

E) A) and B)
F) A) and C)

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Question 53

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A classified balance sheet is necessary for calculating a company's current ratio.

All lawsuits in which a company has been named a defendant should be either disclosed in the company's notes to the financial statements,or recognized as a liability on its balance sheet.

[The following information applies to the questions displayed below.] Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term. -Based on this information alone,what is the amount of cash flow from operating activities reported on Madison's Year 1 statement of cash flows?

The current ratio is a measure of a company's liquidity.