ACCOUNTING FOR LIABILITIES

What is the definition of liabilities?

• Liabilities are obligations owed.

• Liabilities are items that are owned with value.

• Liabilities are the cost of doing business.

Which of the following items is a long-term liability?

• Accrued expenses payable.

• Unearned revenue.

• Mortgages payable.

• Accounts payable.

Suppose a hotel has RM40,000 of long-term debt at year end. Of this amount, RM10,000 must be repaid within the next year. Which of the following statements is true?

• The classified balance sheet would show RM40,000 of long-term debt under the heading "Current liabilities."

• The classified balance sheet would show RM40,000 of long-term debt under the heading "Long-term liabilities."

• The classified balance sheet would show RM50,000 of long-term debt under the heading "Long-term liabilities."

• The classified balance sheet would show RM30,000 of long-term debt under the heading "Long-term liabilities."

Which of the following accounts is NOT a liability?

• Accounts Payable

• Accounts Receivable

• Salaries Payable

• Notes Payable

Warranty is one of Contingent Liabilities.

• TRUE

• FALSE

Current liabilities: Liabilities that are expected to be paid within a year or normal operating cycle, whichever is longer.

• TRUE

• FALSE

On December 1, ABC Co. hired Juanita Perez to begin working on January 2 at a monthly salary of RM4,000. ABC's balance sheet of December 31 will show a liability of

• RM4,000

• RM48,000

• No Liability

The expected balance in the account Bonds Payable.

• Debit

• Credit

Entity A issued RM200,000 bonds and received RM200,000 in cash.

Journal entry to record this transaction:

• Dr. Bonds Payable 200,000

  Cr. Cash 200,000

• Dr. Cash 200,000

  Cr. Bonds Payable 200,000

The interest charged on a RM100,000 note payable, at the rate of 10%, on a 60-day note would be

• RM1,667

• RM10,000

• RM6,000

• RM16,667