1. 12.1 Why is Accounts Payable classified as a current liability?
2. 12.1 On which financial statement are current liabilities reported?
3. 12.1 What is the difference between a noncurrent liability and a current liability?
4. 12.1 How is the sales tax rate usually determined? Does the company get to keep the sales tax as earned
revenue?
5. 12.2 If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the
next eight years, how much will be accounted for as a current portion of a noncurrent note payable each
year?
6. 12.2 What amount is payable to a state tax board if the original sales price is $3,000, and the tax rate is
3.5%?
7. 12.2 What specific accounts are recognized when a business purchases equipment on credit?
8. 12.3 What is a contingent liability?
9. 12.3 What are the two FASB required conditions for a contingent liability to be recognized?
10. 12.3 If a bankruptcy is deemed likely to occur and is reasonably estimated, what would be the
recognition and disclosure requirements for the company?
11. 12.3 Name the four contingent liability treatments.
12. 12.3 A company’s sales for January are $250,000. If the company projects warranty obligations to be 5%
of sales, what is the warranty liability amount for January?
13. 12.4 What is a key difference between a short-term note payable and a current portion of a noncurrent
note payable?
14. 12.4 What business circumstance could bring about a short-term note payable created from a
purchase?
15. 12.4 What business circumstance could produce a short-term notes payable created from a loan?
16. 12.4 Jain Enterprises honors a short-term note payable. Principal on the note is $425,000, with an annual
interest rate of 3.5%, due in 6 months. What journal entry is created when Jain honors the note?
17. 12.5 What are examples of involuntary deductions employers are required to collect for employee and
employer payroll liabilities?
Chapter 12 Current Liabilities 793
18. 12.5 What are the tax rates for FICA Social Security and FICA Medicare? What are the maximum taxable
earnings amounts for each of these taxes?
19. 12.5 What are FUTA and SUTA taxes? Is there any possible reduction in the FUTA tax rate? If so, what is
the reduction, and how is this determined?
20. 12.5 Use Figure 12.15 as a reference to answer the following questions.
A. If an employee makes $1,400 per month and files as single with no withholding allowances, what would
be his monthly income tax withholding?
B. What would it be if an employee makes $2,500 per month and files as single with two withholding
allowances?
Exerci