Accounting II Chapter 8 Review

Contingent liabilities that are probable but cannot be reasonably estimated are disclosed in the:

• Notes to the financial statements

• Cash flow statement
• Balance sheet
• Income statement

The cost of a product warranty should be included as an expense in the:

• future period when the product is repaired or replaced

• future period when the cost of repairing the product is paid

• period the cash is collected for a product sold on account

• period of the sale of the product

Liabilities that are due and payable within one year are known as short-term liabilities.

• True

• False

_____ liabilities may arise from past transactions if certain events occur in the future.

• Noncurrent

• Current

• Long-term

• Contingent

Most employers are levied a tax on payrolls for:

• federal unemployment compensation tax

• medical insurance premiums

• union dues

• Income tax and property tax

What is an outstanding share?

• Total number of shares issued by a company
• Total number of shares of a company's stock currently owned by all shareholders
• Number of shares available for purchase
• Number of shares held by company executives

Liabilities due beyond one year are classified as _____.

• Long-term liabilities
• Short-term liabilities
• Current liabilities
• Intermediate liabilities

What is the effect of a stock dividend on the balance sheet?

• No direct effect on the balance sheet
• Reduces equity on the balance sheet
• Decreases liabilities on the balance sheet
• Increases assets on the balance sheet

The issuance of common stock affects both paid-in capital and retained earnings.

• True

• False

Which of the following rights enables stockholders to maintain their ownership percentage in the case of a new issue?

• Liquidation right
• Right of preemption

• Right to vote

• Dividend right