Question

Which of the following statements is false?

a. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing.
b. Cash dividends should be recorded as a liability when they are declared by the board of directors.
c. A zero-interest-bearing note does not explicitly state an interest rate on the face of the note.
d. FICA taxes withheld from employees' payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.

Answer 1

The false statement is 'd. FICA taxes withheld from employees' payroll checks should never be recorded as a liability,' as these taxes are a liability until remitted to the government.

Step-by-step explanation:

Identification of False Statement

The statement that is false is: d. FICA taxes withheld from employees' payroll checks should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority. This is incorrect because the amounts withheld for FICA taxes are indeed a liability for the employer until they are remitted to the government.

Statement a is true because a company can exclude a short-term obligation from current liabilities under certain conditions, such as intentions and the ability to refinance the obligation. Statement b is also true because cash dividends become a liability when declared by the board of directors. Lastly, statement c is true because a zero-interest-bearing note would not explicitly state an interest rate, though it would incur interest implicitly through the initial discounted price.