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Exam 9: Accounting for Current Liabilities and Payroll

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Question 51

True/False

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

A) True
B) False

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Question 52

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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.

A) True
B) False

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Question 53

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[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?

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

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.

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?