Exam 9: Reporting and Interpreting Liabilities

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. -The amount of interest expense for the year ended December 31,2019 is:

Sharp Company borrowed $500,000 on a 6% one-year,interest-bearing note dated November 1,2019 with interest payable at maturity.The annual accounting period ends on December 31.Assume that adjusting entries are only made at December 31,the company's fiscal year-end. Prepare journal entries for each of the following dates: A.November 1,2019. B.December 31,2019. C.October 31,2020.

A contingent liability cannot be disclosed in a note to the financial statements unless it can be estimated.

Working capital is a measure of short-run liquidity and is measured by dividing current assets by current liabilities.

If income tax expense reported on the income statement is $45,000 for 2019,and the tax return for 2019 (the first year)shows an income tax liability of $42,000,the deferred income tax on the balance sheet at the end of 2019 will be which of the following? Assume a 21% tax rate.

Working capital decreases when accrued wages expense is recorded at year-end.

Which of the following statements is correct?

You have a goal of having $100,000 five years from today.The return on the investment is expected to be 8% and will be compounded semiannually.The amount that needs to be invested today is closest to:

A company's income statement reported net income of $80,000 during 2019.The income tax return excluded a revenue item of $6,000 (reported on the income statement)because under the tax laws the $6,000 would not be reported for tax purposes until 2020.Which of the following statements is incorrect assuming a 21% tax rate?

Working capital increases when a company accrues sales revenue at year-end.

Border Company purchased a truck that cost $17,000.The company signed a $17,000 note payable that specified four equal annual payments (at each year-end),each of which includes a payment on the principal and interest on the unpaid balance at 10% per annum. A.Calculate the amount of each equal payment (round your answer to the nearest whole dollar amount). B.Prepare the journal entry to record the purchase of the truck. C.Prepare the journal entry to record the first annual payment on the note (assume no interest has been accrued during the year). D.Will the interest paid with the first annual payment be more than,or less than,the interest paid with the second annual payment? Explain your answer.

When a company receives cash before products or services are provided the following results:

Mission Corp.borrowed $50,000 cash on April 1,2019,and signed a one-year 12%,interest-bearing note payable.The interest and principal are both due on March 31,2020. -Assume that the appropriate adjusting entry was made on December 31,2019 and that no adjusting entries have been made during 2020.Which of the following would be the required journal entry to pay the entire amount due on March 31,2020?

Which of the following correctly describes the accounting for leases?

Smith Corporation entered into the following transactions: • Purchased inventory on account. • Collected an account receivable. • Purchased equipment using cash. - Which of the following statements about Smith's transactions is correct?

SRJ Corporation entered into the following transactions: • The accrual of interest expense on a six-month note payable. • Collected cash for services to be provided within the next six months. • The reclassification of short-term debt to long-term debt. - Which of the following statements is correct with respect to determining the net cash flow from operating activities on a statement of cash flows?

Purchasing inventory on account increases the accounts payable turnover ratio.

Which of the following results in a decrease in working capital?

The accrual of interest results in an increase liabilities and a decrease in cash.

Which of the following is used to determine whether the lessor maintains effective control of the leased asset?