Face value of a note payable plus total interest is called: face value principal maturity value proceeds 2 Hatmaker Company signs a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest cent) will the company owe using a 360-day year? $ 38.84 $354.38 $ 39.38 $315.00 3 Bingo Corp signed a promissory note of $1,000 for one of its vendors in exchange for supplies. $100 cash payment is due upon signing the note and the term is that the balance and interest are due in 90 days at 12% (assume 360 days). Bingo will record the note in the book at the inception of the term as Debit Accounts Receivable $1, 000; Credit Cash $100 and credit Notes Receivable $900 Debit Accounts Payable $1, 000; Credit Cash $100 and credit Notes Payable $900 Debit Supplies $1, 000; Credit Cash $100 and credit Notes Payable $900 None of the above 4 Archies had sales of $6,758. The state sales tax rate is 7%. All sales are cash. What amount will be credited to Sales revenue? $7,231.06 $6,758.00 $473.06 $458.00 5 A major difference between accounts payable and notes payable is that Accounts payable are classified as current assets but notes payable are not Notes payable are more formal than accounts payable Notes payable are long-term assets but accounts payable are current assets Notes payable charge interest but accounts payable do not 6 On June 20, 2013, ABC Services received $2,400 in advance from a customer for one months service. The journal entry to record the receipt of cash would be which of the following? Debit Cash $2,400 and credit Service revenue $2,400 Debit Unearned service revenue $2,400 and credit Service revenue $2,400 Debit Cash $2,400 and credit Unearned service revenue $2,400 Debit Unearned service revenue $2,400 and credit Cash $2,400 7 Carter Company records sales on account of $950,500. The company operates in a state that imposes a 5% sales tax. Which of the following would be the amount of the Sales tax payable to the state? $45,000 $50,500 $47,525 $55,000 8 Accounts payable is a(n) Contingent liability Estimated liability Accrued liability Known liability 1 All the following are true about an installment note for a borrower except Installment notes are a series of payments to a lender Installment notes are recorded by including a credit to cash Installment notes are recorded by including a credit to notes payable Installment notes are recorded by including a debit to cash 2 Accounts payable are Amounts owed to suppliers for products and/or services purchased on credit Paid within 30 days Estimated liabilities Long-term liabilities 4 The face amount of a promissory note is called the: time of the note discount of the note principal of the note interest rate of the note 6 The entry to accrue interest at year-end on a note payable would be debit Interest Expense, credit Cash debit Interest Expense, credit Notes Payable debit Interest Expense, credit Interest Payable 8 On June 20, 2013, ABC Services received $2,400 in advance from a customer for one months service. The journal entry to record the receipt of cash would be which of the following? Debit Cash $2,400 and credit Service revenue $2,400 Debit Cash $2,400 and credit Unearned service revenue $2,400 Debit Unearned service revenue $2,400 and credit Cash $2,400 Debit Unearned service revenue $2,400 and credit Service revenue $2,400 Lenient Auto signed a $45,000 8% 30-year installment note on November 1, 2013. The note requires semiannual payments of $750 plus interest on May 1 and November 1 of each year. How will Lenient Auto classify this loan on its December 31, 2013 Balance Sheet? Current Portion of Long-term debt, $0; Long-term debt, $45,000 Current Portion of Long-term debt, $45,000; Long-term debt, $0 Current Portion of Long-term debt, $750; Long-term debt, $44,250 Current Portion of Long-term debt, $1,500; Long-term debt, $43,500 4 Bingo Corp signed a promissory note of $1,000 for one of its vendors in exchange for supplies. $100 cash payment is due upon signing the note and the term is that the balance and interest are due in 90 days at 12% (assume 360 days and that interest payable has been recorded). Bingo will record the transaction at the end of the term as Debit Accounts Receivable $900; Credit Cash $900 Debit Notes Payable $900, Debit Interest payable $27; Credit Cash $927 Debit Accounts Payable $900, Debit Interest expense $27; Credit Cash $927 None of the above 5 The cost of borrowing money or the return on lending money is called Notes payable Interest Liabilities None of the above A short-term note payable Is a contingent liability Is an estimated liability Is a written promise to pay a specified amount on a definite future date within one year or the companys operating cycle, whichever is longer Is not a liability until the due date 8 Archies had sales of $6,758. The state sales tax rate is 7%. All sales are cash. What amount will be debited to Cash? $7,231.06 $866.06 $473.06 $6,758.00 When a company issues a promissory note, the entry will include a credit to Note Payable for the face value of the note face value of the note minus interest to pay face value of the note plus interest to pay maturity value of the note We R Kids purchased playground equipment for 12,000 on credit and issued a 120-day note bearing interest at 9 percent a year as evidence of the debt. To record this transaction, the accountant would Debit equipment for $12,000, debit Interest Expense for $360, and credit Notes Payable for $12,360 Debit equipment for $12,360, credit Interest Expense for $360, and credit Notes Payable for $12,000 Debit equipment for $12,000 and credit Notes Payable for $12,000 Debit equipment for $12,000 and credit Accounts Payable for $12,000 Vacation benefits are an example of: accounts to be created estimated liabilities, contingent liabilities a pension plan a reconciliation of petty cash 2 The matching principle requires businesses to record Warranty Expense: (choose 2) incurred when the company makes a sale with its accounts payable in the same period the company records revenue related to said warranty with a check number P 3 Warranty obligations are estimated based on: (choose 2) historical experience of anticipated product defects the customers age and gender material and labors estimates for repair the suppliers 4 Contingent liabilities are: (choose 2) set values used for the matching principle potential liabilities that may not actually occur in the future accrued when they are likely to occur & can be reasonably estimated the same thing as estimated liabilities 5 Two examples of an estimated liability are: (choose 2) Supplier information Employee benefits Income taxes Account to be debited 5 The obligation a company has to the purchaser of its product or service is: (choose 2) to keep records of competing products or services an estimate of obligation its names of suppliers a warranty liability 7 Accounting for liabilities is important for a company to remain in compliance with: (choose 2) GAAP IRR JIT IFRS 8 An estimated liability is: accrued overtime a known obligation of uncertain amount that can be estimated, the same as a payroll the estimation of a business liability 7 A co-signed note Payable is an example of a (an): account to be credited form of financial statement assets estimated current liability 8 Two types of classification of Contingent Liability are: (choose 2) Unreasonable Unlikely Probably Remote 1 Good management of current liabilities can do which of the following? Helps deplete the cash fund Helps increase a companys debt Helps improve cash flow Helps maintain good supplier relations 2 Which current liability is generally listed first on the balance sheet? Notes payable Accounts payable Current portions of long-term debt Accrued payables 3 Which of the following statements is true about liabilities? They must involve an outflow of cash They must be certain They may have to be estimated They must be for a specific amount 4 Which of the following is associated with cash received in advance for services to be performed in the future? Estimated warranty payable Unearned revenue Accounts payable Accrued expense 5 Which of the following statements is false about liabilities? They can be classified as either current or long-term They are recorded when paid They are generally valued at the amount of mone
y needed to pay the debt or reported at the fair market value of the goods or services to be delivered Disclosures in the notes to the financial statements are required for most liabilities 6 Unearned revenue is initially recognized with a: Credit to revenue Credit to unearned revenue Debit to unearned revenue Debit to revenue payable 7 Which of the following would be included in the journal entry to record the payment of accrued sales tax? A debit to Sales tax expense A debit to Sales tax payable A credit to Sales tax payable A credit to Sales tax expense 8 Payroll liabilities include taxes paid to the federal, state, or local government what else might qualify for a current liability related to payroll? FICA (Federal Insurance Contribution Act) contributions or Social Security Health insurance Retirement benefits Unemployment insurance 9 Sales revenue for a sporting goods store amounted to $215,000 for the current period. All sales are on account and are subject to a sales tax of 7%. Which of the following would be included in the journal entry to record these sales? A debit to Sales tax payable for $15,050 A credit to Accounts receivable for $215,000 A debit to Accounts receivable for $230,050 A debit to Sales revenue for $215,000 Press this button to open the work area for doing this question Press this button to see the solution for this question. 10 Notes payable is: A business expense A current liability An estimated liability A contingent liability Press this button to open the work area for doing this question Press this button to see the solution for this question. 11 Amounts received in advance from customers for future products or services are called Income Assets Liabilities Revenues 12 Which of the following is true regarding the treatment of accounts payable, sales tax payable, and unearned revenues? Both GAAP and IFRS treat these accounts as known liabilities IFRS treats them as known liabilities, while GAAP treats these accounts as contingent liabilities Both GAAP and IFRS treat these accounts as estimated liabilities GAAP treats them as estimated liabilities, while IFRS treats these accounts as contingent liabilities 2 Which of the following correctly describes Interest payable? Interest payable is shown on the balance sheet as a current liability. Interest payable is shown on the income statement as an operating expense. Interest payable is shown on the balance sheet as a long-term liability. Interest payable is shown on the balance sheet as a current asset. 3 Which of the following is true for a liability to exist? An obligation to pay cash in the future must exist. The identity of the party must be known. The exact amount must be known. A past transaction or event must have occurred. 4 Obligations due to be paid within one year or within the companys operating cycle, whichever is longer, are: Current liabilities Operating cycle liabilities Revenues Bills 8 Which of the following correctly describes the unearned revenue account? The unearned revenue account represents revenue that has been earned and collected. The unearned revenue account represents revenue that has been earned, but not yet collected. The unearned revenue account represents revenue that has been collected, but not yet earned. The unearned revenue account represents revenue that has neither been earned nor collected. 9 Which of the following is a liability created when a company receives cash for services to be provided in the future? Service revenue Unearned revenue Accrued liability Estimated warranty payable 11 Accounts payable is: A contingent liability An estimated liability A current liability A business expense 12 Which of the following is not an example of a certainly determinable liability? Sales tax payable Income taxes payable Unearned revenues Payroll taxes payable 2 Which of the following is a characteristic of a current liability? A current liability is a liability that is due within 30 days A current liability is a liability that is due in longer than a one-year period, or one operating cycle A current liability is a liability that is due within one year or one operating cycle, whichever is longer A current liability is a liability that is due within 10 days 1 Employers are required to ____________ in Medicare tax as the employee. withhold 25% withhold 50% contribute double the amount contribute the same percentage 2 Payroll liabilities are based on: the amount earned before any deductions, t the same thing as estimated liabilities set values used for the matching principle t-accounts that are simplified 3 Medicare tax is: a care tax an employee withholding, a use tax a voluntary deduction 4 An employees gross earnings minus all withholdings is called: Complete pay Take home amount, net pay Benefits An Accrual account 5 __________ Accounts are set up to track liability or employee payroll. (choose 2) Contingent Liability Accrual Payroll 2 Payroll is the process of: Paying employees Creating accounts Organizing accounts payable Forming a pension plan 4 _______ is referred to as FICA. Life insurance Social Security tax Federal tax Income tax 7 Employees are responsible for paying a social security tax of _____%, which is withheld from their wages. 5 3.5 1.45 6.2 8 Employers are required to withhold federal income tax from an employees gross paycheck based on: (choose 2) IRS regulations employees number of dependents marital status age 1 The federal government requires employers to pay an unemployment tax (of ): (choose 2) With a maximum of 5.4% subtracted from the federal rate $7,000 $5,400 6.0 % 2 Who pays Social Security and Medicare taxes? (choose 2) Corporate Headquarters Employees Employers 3 When an employer chooses to match or contribute to retirement accounts, these moneys are: (choose 2) Considered liabilities Recorded as benefits Reduced accordingly after being paid Deducted from an accrual account 4 Employers are required to pay payroll taxes per the: (choose 2) State Unemployment Tax Act Securities and Exchange Commission International Finance Standards Board Federal Unemployment Tax Act 5 Employers with reserves in the unemployment fund will: (choose 2) Pay less than those with small or no reserve Contribute to an employees earnings Pay lower tax rates Be more likely to allow unemployment cases 3 Employers contribution of social security is based on ___________ of an employees wages. (choose 2) The first $50,000 The first $113,700 The first $100,000 6.2% Press this button to open the work area for doing this question Press this button to see the solution for this question. 4 Paid sick days and holidays are: Required Implied Benefits Taken out of retirement planning 6 Unemployment tax rates are determined: By the state By The federal Reserve Based on Social Security earnings By corporate offices 1 Which of the following is an amount for products or services purchased on account? Unearned revenue Estimated warranty payable Accrued expense Accounts payable 8 Employers are required to make provisions for: (choose 2) FICA Medicare Sick days Holiday planning 4 The employers portion of SS and Medicare taxes are recorded as _________________ until the amounts are remitted. benefits accrued accounts receivables a current liability 6 A $20,000, 3-month, 8% note payable was issued on November 1, 2015. What is the amount of accrued interest on December 31, 2015? $133 $267 $200 $800 4 Best in Town Fence had sales on account of $7,200 which were subject to state sales tax of 7%. The entry to record the sales would be to Debit Accounts receivable, $7,704; credit Sales revenue, $7,200; credit Sales tax payable, $504 Debit Accounts receivable, $7,200; debit Sales tax payable, $504; credit Sales revenue, $7,704 Debit Accounts receivable, $7,200; credit Sales revenue, $7,200 Debit Accounts receivable, $7,704; credit Sale revenue, $7,704 11 ABC Company signed a 5-year note payable for $80,000 at 9% annual interest. What is the interest expense for December 31, 2012 if the note was signed on May 1, 2012? $2,400 $7,200 $36,000 $4,800 7 Failure to record a liability can Result in understated net income Result in overstated net income Have no effect on net income Result in overstated total liabilities and owners equity 8 Sales taxes payable is A current liability A business expense An estimated liability A contingent liability