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ACC 206 Exam 1 questions and answers 2025 already graded A+
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ACC 206 Exam 1 questions andanswers 2025 already graded A+
Which of the following is a nonessential component of a liability?
a) The liability must be an unavoidable obligation.
b) The obligation must be liquidated using cash, goods, or services
that were earned by the entity in the performance of its normal
business operation.
c) The liability is a present obligation that entails settlement by
probable future transfer or use of cash, goods, or services.
d) The transaction or other event creating the obligation must have
already occurred. - answer b
Which of the following statements about current liabilities is true?
a) They are liabilities that may be paid out of any asset pool
accumulated by the enterprise as long as payment is due within one
year.
b) They are void of notes payable, as notes are always long-term.
c) They are liabilities that are due and payable on the balance sheet
date.
d) They are due within one year or one operating cycle, whichever is
longer. - answer d
On November 1, 2020, JT Engineering signs a $150,000, 4 percent,
one-year note for which both principal and interest are payable on
November 1, 2021. On the December 31, 2020 balance sheet, how
should JT classify the note and the related interest?
a) It should classify the note payable as a non current liability and
the accrued interest as a current liability.
b) It should classify the note payable as a non current liability and
the accrued interest as a non current liability.
,c) It should classify the note payable as a current liability and the
accrued interest as a current liability.
d) It should classify the note payable as a current liability and the
accrued interest as a non current liability. - answer c
On May 15, 2020, RL Enterprises issues a $312,000, six-month, zero-
interest-bearing note to Federal Bank. The present value of the note
is $300,000. Which of the following must be recorded as part of this
transaction?
a) A credit to Notes Payable of $300,000
b) A credit to Discount on Notes Payable of $12,000
c) A debit to Discount on Notes Payable of $12,000
d) A debit to cash of $312,000 - answer c
Under which of the following circumstances should the currently
maturing portion of long-term debt be classified as a current
liability?
a) If the debt is to be converted into capital stock.
b) If the funds used to liquidate it are currently classified as a long-
term investment on the balance sheet.
c) If the debt is to be refinanced on a long-term basis.
d) If the classified portion will be liquidated within one year using
current assets. - answer d
If an enterprise intends to refinance a short-term obligation on a
long-term basis, which of the following conditions must it meet in
order to exclude that obligation from current liabilities?
a) The enterprise must be able to demonstrate the ability and intent
to complete the refinancing.
b) The interest rate on the long-term obligation is not above the
prime rate.
c) The enterprise has a contractual right to defer settlement of the
liability for at least one year.
, d) The enterprise must demonstrate that a negative effect on
working capital will result if it is not reclassified. - answer c
A recently graduated staff auditor is reviewing evidence of the
ability and intent to complete a refinancing of a short-term
obligation. Which of the following should the auditor reject as being
inadequate evidence for reclassification? Select all that apply.
a) Entering into an agreement that gives the company the right to
defer settlement for at least one year
b) A statement by the board of directors that refinancing is
inevitable.
c) Actual refinancing after the balance sheet date by issuance of
equity securities.
d) Actual refinancing after the balance sheet date by issuance of a
long-term obligation - answer b,c,d
Bravo Industries intends to retire $950,000 in short-term debt using
proceeds from the sale of 30,000 shares of common stock. The stock
sells for $25 per share. How much of its short-term debt can Bravo
exclude from current liabilities if the sale occurs after the balance
sheet date but before the balance sheet issue?
a) $750,000
b) $950,000
c) $0
d) $200,000 - answer c
GAAP requires the use of the estimated future rate when calculating
compensated absences?
a) true
b) false - answer b
What is the difference between vested rights and accumulated
rights when accounting for compensated absences?
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