Question : Multiple Choice Questions 31. Which of the following statements correct? A. Current liabilities initially : 1228550

Multiple Choice Questions
 

31. Which of the following statements is correct? 
A. Current liabilities are initially recorded at the amount of their principal plus interest.
B. Current liabilities are those liabilities due within one year.
C. Liquidity refers to the ability to pay all debts within one year.
D. Current liabilities affect both the quick ratio and working capital.

32. Which of the following is not a current liability? 
A. A liability due within one-year for a business with a fifteen-month operating cycle.
B. A liability due within three months for a business with a two-month operating cycle.
C. A liability due within one-year for a business with a nine-month operating cycle.
D. A liability due within fifteen months for a business with a one-year operating cycle.

33. Which of the following is incorrect? 
A. Current liabilities are those that will be satisfied within one year or the operating cycle, whichever is longer.
B. Liquidity is the ability of the company to meet its total obligations.
C. Current liabilities impact a company’s liquidity.
D. Working capital is equal to current assets minus current liabilities.

34. How is the quick ratio calculated? 
A. It is current assets minus current liabilities.
B. It is current assets divided by current liabilities.
C. It is quick assets divided by current liabilities.
D. It is current liabilities divided by current assets.

35. Which of the following accounts would not be considered when calculating the quick ratio? 
A. Marketable securities.
B. Inventory.
C. Accounts receivable.
D. Accounts payable.

36. Which of the following accounts would not be considered when calculating the quick ratio? 
A. Taxes payable
B. Accounts receivable
C. Cash
D. Prepaid rent

37. A company has a quick ratio of 1.9 before paying off a large current liability with cash. As a result, what happens to the quick ratio? 
A. It is greater than 1.9.
B. It is less than 1.9.
C. It remains equal to 1.9.
D. It is either greater than 1.9 or less than 1.9 depending upon the dollar amount involved.

38. A company has a quick ratio of 0.9 before paying off a large current liability with cash. As a result, what happens to the quick ratio? 
A. It is greater than 0.9.
B. It is less than 0.9.
C. It remains equal to 0.9.
D. It is either greater than 0.9 or less than 0.9 depending upon the dollar amount involved.

39. The following is a partial list of account balances from the books of Probst Enterprise at the end of 2010:
  
Based solely upon these balances, what is the quick ratio? 
A. 0.76
B. 1.15
C. 0.26
D. 0.79

40. At year-end 2010, General Tech reported a quick ratio of 2.75 and at year-end 2009 it was 3.10. Which of the following is a potential cause of the decrease in this ratio? 
A. An increase in accounts payable and a decrease in inventories.
B. A decrease in inventories and an increase in long-term notes payable.
C. A decrease in short-term borrowings and an increase in cash.
D. An increase in accounts payable and a decrease in cash.