1. The entry to record interest expense on a bank loan payable is a debit to...

1. The entry to record interest expense on a bank loan payable is a

debit to interest expense and credit to note payable.

debit to note payable and credit to interest revenue.

debit to interest payable and credit to interest revenue.

debit to interest expense and credit to interest payable.

2.Which of the following statements is true?

If any portion of a non-current liability is to be paid in the next year, the entire debt should be classified as a current liability.

“Current maturities of non-current debt” refers to the amount of interest on notes payable that must be paid in the current year.

Even though current and non-current debt must be shown separately on the statement of financial position, it is not necessary to prepare a journal entry to recognize this.

A non- current liability is an obligation that is expected to be paid within one year.

3.Roofer’s Inc. had an operating line of credit of $100,000 and overdrew its bank balance to result in a negative cash balance of $33,000 at year-end. This would be reported in the statement of financial position as

a current liability of $33,000.

a non-current liability of $67,000.

a current asset of $67,000.

a current asset of $(33,000).

4.Which of the following statements is true?

Liquidity ratios measure a company’s long-term ability to pay debt.

Solvency ratios measure a company’s ability to repay current debt.

A high liquidity ratio generally indicates that a company has a greater ability to meet its current obligations.

Solvency ratios measure a company’s ability to survive on a short-term basis.

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Expert Solution

ekkarill92 answered 11 months ago

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