COLLEGE ACCOUNTING 16TH EDITION
STUDY GUIDE 2026 QUESTIONS WITH
ANSWERS GRADED A+
◉ A short-term obligation can be excluded from current liabilities if the
company intends to refinance it on a long-term basis. Answer: F
◉ Many companies do not segregate the sales tax collected and the
amount of the sale at the time of the sale. Answer: T
◉ Companies report the amount of social security taxes withheld from
employees as well as the companies' matching portion as current
liabilities until they are remitted. Answer: T
◉ Accumulated rights exist when an employer has an obligation to make
payment to an employee even after terminating his employment.
Answer: F
◉ Companies should recognize the expense and related liability for
compensated absences in the year earned by employees. Answer: T
◉ Companies should accrue an estimated loss from a loss contingency if
information available prior to the issuance of financial statements
indicates that it is probable that a liability has been incurred. Answer: F
,◉ A company discloses gain contingencies in the notes only when a
high probability exists for realizing them. Answer: T
◉ The expected profit from a sales type warranty that covers several
years should all be recognized in the period the warranty is sold.
Answer: T
◉ The fair value of an asset retirement obligation is recorded as both an
increase to the related asset and a liability. Answer: T
◉ Under the expense warranty approach, companies charge warranty
costs only to the period in which they comply with the warranty.
Answer: F
◉ Prepaid insurance should be included in the numerator when
computing the acid-test (quick) ratio. Answer: F
◉ Paying a current liability with cash will always reduce the current
ratio. Answer: F
◉ Liabilities are
a. any accounts having credit balances after closing entries are made.
b. deferred credits that are recognized and measured in conformity with
generally
accepted accounting principles.
c. obligations to transfer ownership shares to other entities in the future.
, d. obligations arising from past transactions and payable in assets or
services in the future. Answer: D
◉ Which of the following is a current liability?
a. A long-term debt maturing currently, which is to be paid with cash in
a sinking fund
b. A long-term debt maturing currently, which is to be retired with
proceeds from a new
debt issue
c. A long-term debt maturing currently, which is to be converted into
common stock
d. None of these Answer: D
◉ ccounts payable should not be reported at their present value. Answer:
◉ Which of the following is not true about the discount on short-term
notes payable?
a. The Discount on Notes Payable account has a debit balance.
b. The Discount on Notes Payable account should be reported as an asset
on the
balance sheet.
c. When there is a discount on a note payable, the effective interest rate
is higher than
the stated discount rate.
d. All of these are true. Answer: B
STUDY GUIDE 2026 QUESTIONS WITH
ANSWERS GRADED A+
◉ A short-term obligation can be excluded from current liabilities if the
company intends to refinance it on a long-term basis. Answer: F
◉ Many companies do not segregate the sales tax collected and the
amount of the sale at the time of the sale. Answer: T
◉ Companies report the amount of social security taxes withheld from
employees as well as the companies' matching portion as current
liabilities until they are remitted. Answer: T
◉ Accumulated rights exist when an employer has an obligation to make
payment to an employee even after terminating his employment.
Answer: F
◉ Companies should recognize the expense and related liability for
compensated absences in the year earned by employees. Answer: T
◉ Companies should accrue an estimated loss from a loss contingency if
information available prior to the issuance of financial statements
indicates that it is probable that a liability has been incurred. Answer: F
,◉ A company discloses gain contingencies in the notes only when a
high probability exists for realizing them. Answer: T
◉ The expected profit from a sales type warranty that covers several
years should all be recognized in the period the warranty is sold.
Answer: T
◉ The fair value of an asset retirement obligation is recorded as both an
increase to the related asset and a liability. Answer: T
◉ Under the expense warranty approach, companies charge warranty
costs only to the period in which they comply with the warranty.
Answer: F
◉ Prepaid insurance should be included in the numerator when
computing the acid-test (quick) ratio. Answer: F
◉ Paying a current liability with cash will always reduce the current
ratio. Answer: F
◉ Liabilities are
a. any accounts having credit balances after closing entries are made.
b. deferred credits that are recognized and measured in conformity with
generally
accepted accounting principles.
c. obligations to transfer ownership shares to other entities in the future.
, d. obligations arising from past transactions and payable in assets or
services in the future. Answer: D
◉ Which of the following is a current liability?
a. A long-term debt maturing currently, which is to be paid with cash in
a sinking fund
b. A long-term debt maturing currently, which is to be retired with
proceeds from a new
debt issue
c. A long-term debt maturing currently, which is to be converted into
common stock
d. None of these Answer: D
◉ ccounts payable should not be reported at their present value. Answer:
◉ Which of the following is not true about the discount on short-term
notes payable?
a. The Discount on Notes Payable account has a debit balance.
b. The Discount on Notes Payable account should be reported as an asset
on the
balance sheet.
c. When there is a discount on a note payable, the effective interest rate
is higher than
the stated discount rate.
d. All of these are true. Answer: B
