Chapter 12 Current Liabilities and Contingencies Flashcards
balances owed to others for goods, supplies, or services purchased on open account
accounts payable (trade accounts payable)
rights that can be carried forward to future periods if not used in the period in which earned
accumulated rights
relates total current liabilities to cash, short-term investments, and receivables:
(cash+short-term investments+A/R)/ current liabilities
acid-test (quick) ratio
warranty that the product meets agreed-upon specifications in the contract at the time the product is sold
a type of warranty that is included in the sales price of a company’s product and is often referred to as
assurance-type warranty
most companies give _____ to certain/all employees in addition to their regular salaries or wages and usually depends on the company’s yearly profit
bonus
revenue gained by retailers through unredeemed gift cards or other prepaid services that are never claimed
breakage
paid absences from employment for such items as vacations, illness, holidays, and jury duties
compensated balances
“an existing condition, situation, or set of circumstances involving uncertainty as to possible loss (loss contingency) or gain (gain contingency) to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur
contingency
depends on the occurrence of one or more future events to confirm either the amount payable, the payee, the date payable, or its existence
contingent liabilities
obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities
current liabilities
should be classified as current liabilities
current maturities of long-term debt
the ratio of total current assets to total current liabilities
current assets/ current liabilities
current ratio
occurs when a government claims privately owned property against the wishes of its owners
expropriation
the OASDI tax is usually referred to as FICA, Federal Insurance Contribution Act, which is probably what you see on your paycheck being withheld
FICA
Federal Unemployment Tax Act
provides financial assistance to eligible workers who may have been laid off through no fault of their own
FUTA
claims or rights to receive assets (or have a liability reduced) whose existence is uncertain but which may become valid eventually
gain contingencies
when you owe money to another party
liabilities
must consider the following:
1. the time period in which the underlying cause of action occurred
2. the probability of an unfavorable outcome
3. the ability to make a reasonable estimate of the amount of loss
litigation, claims, and assessments
involve possible losses
loss contingencies
written promises to pay a certain sum of money on a specified future date
notes payable (trade notes payable)
Old Age, Survivor, and Disability Insurance
Social security legislation provides this federal benefit for certain individuals and their families which is funded by taxes paid from employer and employee
OASDI
made to stimulate sales
premium
the future event or events are likely to occur
probable (contingency)
the chance of the future event or events occurring is more than remote but less than likely
reasonably possible (contingecy)
cash collected from a customer that a company expects to return after a specified period or when certain conditions are satisfied
refundable deposit
the chance of the future event or events occurring is slight
remote (contingency)
warranty that provides an additional service beyond the assurance-type warranty
this type of warranty is not included in the sales price of the product and is referred to as a _____
service-type warranty
combination of FICA and the federal Medicare tax is commonly referred to as the _____
social security tax
aka accounts payable
trade accounts payable
aka notes payable
trade notes payable
advance payments a company receives for products or services that are to be delivered or performed in the future
unearned (deferred) revenues
these exist when an employer has an obligation to make payment to an employee even after terminating his or her employment
vested rights
a promise made by a seller to a buyer to make good on a deficiency of quantity, quality, or performance in a product
warranty
aka current ratio, want the numerator to be greater than the denominator because working capital is the excess of current assets over current liabilities
working capital ratio
