Smartbooks Exam 3 Questions With
Already Solved Correctly Answers 2025
Simms Accountants charged a client $2,000 cash plus tax for services provided in a
state where the service sales tax rate is 6%. As a result of this event, the ______.
CORRECT ANSWERS cash account increases by $2,120
sales tax liability account increases by $120
A potential obligation arising from a past event is called a(n) CORRECT ANSWERS
contingent liability
Warranty obligations ______. CORRECT ANSWERS have uncertain timing and
amounts
are reported in financial statements
What type of interest rate remains constant during the term of the loan? CORRECT
ANSWERS fixed
Loans that require payments of principal and interest at regular intervals are called
______. CORRECT ANSWERS installment notes
When a company recognizes a cash revenue event that is subject to state sales tax, the
balance in the Cash account increases by ______ the amount of revenue. CORRECT
ANSWERS more than
Which of the following statements regarding contingent liabilities is true? (Select all that
apply.) CORRECT ANSWERS A contingent liability is a potential obligation arising from
a past event.
For reporting purposes, contingent liabilities are sorted into three categories depending
on the likelihood of their becoming actual liabilities.
The amount or existence of a contingent liability depends on some future event.
Warranties normally ______. CORRECT ANSWERS are based on estimates
cover a specific time period
guarantee repair or replacement
What type of interest rate fluctuates up or down during the loan period? CORRECT
ANSWERS variable
Payments on installment loans ______. CORRECT ANSWERS include a repayment of
a portion of the principal balance
include a payment for interest
, The average time it takes a business to convert cash to inventory, inventory to accounts
receivable, and accounts receivable back to cash is commonly called the CORRECT
ANSWERS operating cycle
A business has a debt that is due in May, Year 2. At December 31, Year 1 the company
does not plan to use any of its current assets to repay this debt. This debt should be
classified as ______ on the December 31, Year 1 balance sheet. CORRECT
ANSWERS long-term
Which of the following statements regarding contingent liabilities is true? CORRECT
ANSWERS The amount or existence of a contingent liability depends on some future
event.
For reporting purposes, contingent liabilities are sorted into three categories depending
on the likelihood of their becoming actual liabilities.
A contingent liability is a potential obligation arising from a past event.
Current assets include ______. CORRECT ANSWERS supplies
inventory
accounts receivable
cash
Current liabilities include ______. CORRECT ANSWERS wages payable
10 years bonds due in 5 months
accounts payable
Which of the following statements are true? CORRECT ANSWERS Most businesses
provide information about their bill-paying ability by classifying their assets and liabilities
according to liquidity.
The more quickly an asset is converted to cash or consumed, the more liquid it is
considered.
Which of the following statements are true? CORRECT ANSWERS The requirements
for establishing a corporation vary from state to state.
A proprietorship is the simplest form of business organization to organize and operate.
Creditors cannot claim owners' personal assets as payment for the company's debts if
the company is organization as a CORRECT ANSWERS corporation
Owner contributions and retained earnings are combined in a single capital account on
the balance sheets of ______. CORRECT ANSWERS proprietorships
The greatest potential for rewards when a corporation prospers rests with ______
stockholders. CORRECT ANSWERS common
Preferred stock ______. CORRECT ANSWERS has a liquidation value that, in case of
bankruptcy, is paid before assets are distributed to common stockholders
Already Solved Correctly Answers 2025
Simms Accountants charged a client $2,000 cash plus tax for services provided in a
state where the service sales tax rate is 6%. As a result of this event, the ______.
CORRECT ANSWERS cash account increases by $2,120
sales tax liability account increases by $120
A potential obligation arising from a past event is called a(n) CORRECT ANSWERS
contingent liability
Warranty obligations ______. CORRECT ANSWERS have uncertain timing and
amounts
are reported in financial statements
What type of interest rate remains constant during the term of the loan? CORRECT
ANSWERS fixed
Loans that require payments of principal and interest at regular intervals are called
______. CORRECT ANSWERS installment notes
When a company recognizes a cash revenue event that is subject to state sales tax, the
balance in the Cash account increases by ______ the amount of revenue. CORRECT
ANSWERS more than
Which of the following statements regarding contingent liabilities is true? (Select all that
apply.) CORRECT ANSWERS A contingent liability is a potential obligation arising from
a past event.
For reporting purposes, contingent liabilities are sorted into three categories depending
on the likelihood of their becoming actual liabilities.
The amount or existence of a contingent liability depends on some future event.
Warranties normally ______. CORRECT ANSWERS are based on estimates
cover a specific time period
guarantee repair or replacement
What type of interest rate fluctuates up or down during the loan period? CORRECT
ANSWERS variable
Payments on installment loans ______. CORRECT ANSWERS include a repayment of
a portion of the principal balance
include a payment for interest
, The average time it takes a business to convert cash to inventory, inventory to accounts
receivable, and accounts receivable back to cash is commonly called the CORRECT
ANSWERS operating cycle
A business has a debt that is due in May, Year 2. At December 31, Year 1 the company
does not plan to use any of its current assets to repay this debt. This debt should be
classified as ______ on the December 31, Year 1 balance sheet. CORRECT
ANSWERS long-term
Which of the following statements regarding contingent liabilities is true? CORRECT
ANSWERS The amount or existence of a contingent liability depends on some future
event.
For reporting purposes, contingent liabilities are sorted into three categories depending
on the likelihood of their becoming actual liabilities.
A contingent liability is a potential obligation arising from a past event.
Current assets include ______. CORRECT ANSWERS supplies
inventory
accounts receivable
cash
Current liabilities include ______. CORRECT ANSWERS wages payable
10 years bonds due in 5 months
accounts payable
Which of the following statements are true? CORRECT ANSWERS Most businesses
provide information about their bill-paying ability by classifying their assets and liabilities
according to liquidity.
The more quickly an asset is converted to cash or consumed, the more liquid it is
considered.
Which of the following statements are true? CORRECT ANSWERS The requirements
for establishing a corporation vary from state to state.
A proprietorship is the simplest form of business organization to organize and operate.
Creditors cannot claim owners' personal assets as payment for the company's debts if
the company is organization as a CORRECT ANSWERS corporation
Owner contributions and retained earnings are combined in a single capital account on
the balance sheets of ______. CORRECT ANSWERS proprietorships
The greatest potential for rewards when a corporation prospers rests with ______
stockholders. CORRECT ANSWERS common
Preferred stock ______. CORRECT ANSWERS has a liquidation value that, in case of
bankruptcy, is paid before assets are distributed to common stockholders
