61. Sales taxes payable:
A. Is an estimated liability.
B. Is a contingent liability.
C. Is a current liability for retailers.
D. Is a business expense.
E. Is a long-term liability.
62. Unearned revenue is initially recognized with a:
A. Credit to unearned revenue.
B. Credit to revenue.
C. Debit to revenue payable.
D. Debit to revenue.
E. Debit to unearned revenue.
63. Advance ticket sales totaling $6,000,000 cash would be recognized as follows:
A. Debit Sales, credit Unearned Revenue.
B. Debit Unearned Revenue, credit Sales.
C. Debit Cash, credit Unearned Revenue.
D. Debit Unearned Revenue, credit Cash.
E. Debit Cash, credit Revenue Payable.
64. A contingent liability:
A. Is always of a specific amount.
B. Is a potential obligation that depends on a future event arising out of a past transaction or event.
C. Is an obligation not requiring future payment.
D. Is an obligation arising from the purchase of goods or services on credit.
E. Is an obligation arising from a future event.
65. Which of the following is a true statement regarding the treatment of accounts payable, sales tax payable, and unearned revenues?
A. Both GAAP and IFRS treat these accounts as estimated liabilities.
B. GAAP treats them as estimated liabilities, while IFRS treats these accounts as contingent liabilities.
C. IFRS treats them as estimated liabilities, while GAAP treats theses accounts as contingent liabilities.
D. Both GAAP and IFRS treat these accounts as known liabilities.
E. IFRS treats them as known liabilities, while GAAP treats these accounts as contingent liabilities.
66. In the accounting records of a defendant, lawsuits:
A. Are estimated liabilities,
B. Should always be recorded,
C. Should always be disclosed,
D. Should be recorded if payment for damages is probable and the amount can be reasonably estimated,
E. Should never be recorded,
67. Uncertainties such as natural disasters that could happen in the future:
A. Are not contingent liabilities because they are future events not arising out of past transactions or events.
B. Are contingent liabilities because they are future events arising from past transactions or events.
C. Should be disclosed because of their usefulness to financial statements.
D. Are estimated liabilities because the amounts are uncertain.
E. Arise out of transactions such as debt guarantees.
68. The times interest earned ratio is a measure of:
A. A company's ability to pay its operating expenses on time.
B. A company's ability to pay interest incurred even if sales decline.
C. A company's profitability.
D. The relation between income and debt.
E. The relation between assets and liabilities.
69. Times interest earned is calculated by:
A. Multiplying interest expense times income.
B. Dividing interest expense by income before interest expense.
C. Dividing income before interest expense and any income tax by interest expense.
D. Dividing interest and income tax expense by income before interest and income tax expense.
E. Dividing income before interest expense by interest expense and income taxes.
70. If the times interest ratio:
A. Increases, then risk increases.
B. Increases, then risk decreases.
C. Is greater than 1.5, then the company is in default.
D. Is less than 1.5, the company is carrying too little debt.
E. Is greater than 1.5, the company is likely carrying too much debt.