Question : 56.If a company has advance ticket sales totaling $2,000,000 for : 1258987

 

 

56.If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the receipt of cash would be journalized as:   

A. Debit Sales, credit Unearned Revenue.

 

B. Debit Unearned Revenue, credit Sales.

 

C. Debit Cash, credit Unearned Revenue.

 

D. Debit Unearned Revenue, credit Cash.

 

E. Debit Cash, credit Revenue.

 

 

 

 

57.A contingent liability is:   

A. Always of a specific amount.

 

B. A potential obligation that depends on a future event arising from a past transaction or event.

 

C. An obligation not requiring future payment.

 

D. An obligation arising from the purchase of goods or services on credit.

 

E. An obligation arising from a future event.

 

 

 

 

58.Contingent liabilities are recorded or disclosed unless they are:   

A. Probable and estimable.

 

B. Remote.

 

C. Reasonably possible.

 

D. Probable and not estimable.

 

E. Possible and estimable.

 

 

 

 

59.Contingent liabilities must be recorded if:   

A. The future event is probable and the amount owed can be reasonably estimated.

 

B. The future event is remote.

 

C. The future event is reasonably possible but not estimable.

 

D. The amount owed cannot be reasonably estimated.

 

E. The future event is probable but not estimable.

 

 

 

 

60.Debt guarantees are:   

A. Never disclosed in the financial statements.

 

B. Considered to be contingent liabilities.

 

C. A bad business practice.

 

D. Recorded as liabilities even though it is highly unlikely that the original debtor will default.

 

E. Considered to be current liabilities.

 

 

 

 

61.In the accounting records of a defendant, lawsuits:   

A. Are estimated liabilities.

 

B. Should always be recorded.

 

C. Should always be disclosed.

 

D. Should be recorded if payment for damages is probable and the amount can be reasonably estimated.

 

E. Should never be recorded.

 

 

 

 

62.Uncertainties such as natural disasters are:   

A. Not contingent liabilities because they are future events not arising from past transactions or events.

 

B. Contingent liabilities because they are future events arising from past transactions or events.

 

C. Disclosed because of their usefulness to financial statements.

 

D. Estimated liabilities because the amounts are uncertain.

 

E. Reported in the same way as debt guarantees.

 

 

 

 

63.The times interest earned ratio reflects:   

A. A company’s ability to pay its operating expenses on time.

 

B. A company’s ability to pay interest even if sales decline.

 

C. A company’s profitability.

 

D. The relation between income and debt.

 

E. The relation between assets and liabilities.

 

 

 

 

64.Interest expense is not:   

A. Incurred on current liabilities.

 

B. Likely to stay the same when sales change.

 

C. A fixed expense.

 

D. Likely to fluctuate when sales change.

 

E. A factor in determining a company’s borrowing risk.

 

 

 

 

65.Times interest earned is calculated by:   

A. Multiplying interest expense by income.

 

B. Dividing interest expense by income before interest expense.

 

C. Dividing income before interest expense and income taxes by interest expense.

 

D. Multiplying interest expense by income before interest expense.

 

E. Dividing income before interest expense by interest expense and income taxes.