Question 1

Independent contractors must be individuals who are employed by another company.

Accepted Answer

A) True 
 B)False

Question 2

When do the effects of warranty obligations affect the statement of cash flows?

Accepted Answer

A) When the sale of merchandise is made. 
B) When the warranty obligation is recognized. 
C) When there is a settlement of a warranty claim made by a customer. 
D) None of these answer choices are correct. 
A) When the sale of merchandise is made. 
B) When the warranty obligation is recognized. 
C) When there is a settlement of a warranty claim made by a customer. 
D) None of these answer choices are correct.

Question 3

How does the going concern assumption affect accounting for notes payable?

Accepted Answer

A) It dictates that notes payable be reported at their face value. 
B) It dictates that interest expense be accrued at the end of the accounting period. 
C) It dictates that notes payable be reported at their net realizable value. 
D) It dictates that interest expense be paid when the note matures. 
A) It dictates that notes payable be reported at their face value. 
B) It dictates that interest expense be accrued at the end of the accounting period. 
C) It dictates that notes payable be reported at their net realizable value. 
D) It dictates that interest expense be paid when the note matures.

Question 4

Use the information on January 1,Year 1 to determine the effect of the following entry on the current ratio of Menendez Company:
 
How will this transaction affect the current ratio?

Accepted Answer

A) It have no effect on the current ratio. 
B) It will cause the current ratio to increase. 
C) It will cause the current ratio to decrease. 
D) It will potentially affect the current ratio,but the direction of the change cannot be determined without more information. 
A) It have no effect on the current ratio. 
B) It will cause the current ratio to increase. 
C) It will cause the current ratio to decrease. 
D) It will potentially affect the current ratio,but the direction of the change cannot be determined without more information.

Question 5

Which of the following is a claims exchange transaction?

Accepted Answer

A) Accrual of interest on a note payable 
B) Issued a note to purchase equipment 
C) Repaid principal on a note payable 
D) Paid interest on a note payable 
A) Accrual of interest on a note payable 
B) Issued a note to purchase equipment 
C) Repaid principal on a note payable 
D) Paid interest on a note payable

Question 6

In September of Year 1,Hansen Company issued a note payable to borrow money from its bank.Principal and interest on the note would come due in June Year 2.Interest expense on this note must be accrued at the end of Year 1 for the period from issuance of the note to the last day of the accounting period.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?

Accepted Answer

A) The cash flow from operating activities increases by $208. 
B) Total assets increase by $78. 
C) Stockholder's equity increases by $70. 
D) All of these answer choices are correct. 
A) The cash flow from operating activities increases by $208. 
B) Total assets increase by $78. 
C) Stockholder's equity increases by $70. 
D) All of these answer choices are correct.

Question 8

[The following information applies to the questions displayed below.]

Riley Company borrowed $36,000 on April 1, Year 1 from Titan Bank. The note issued by Riley carried a one-year term and a 7% annual interest rate. Riley earned cash revenues of $1,700 during Year 1 and $1,400 during Year 2. Assume no other transactions.

-Based on this information alone,what amount of cash flow from operating activities would appear on the Year 2 statement of cash flows?

Accepted Answer

A) $770 inflow 
B) $1,400 inflow 
C) $38,520 outflow 
D) $1,120 outflow 
A) $770 inflow 
B) $1,400 inflow 
C) $38,520 outflow 
D) $1,120 outflow

Question 9

[The following information applies to the questions displayed below.]

In December Year 1, Lucas Corporation sold merchandise for $10,000 cash. Lucas estimated that the warranty obligation relating to this sale is $700. On February 12, Year 2, Lucas paid cash of $550 to settle a related warranty claim by this customer.

-Which of the following summarizes the effect of the payment of cash to settle the warranty claim in Year 2 on the elements of the financial statements?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 10

On October 1,Year 1,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a one-year term to maturity.On that date,Harrison recorded a Discount on Notes Payable in the amount of $1,920.

Accepted Answer

A) True 
 B)False

Question 11

Monthly remittance of sales tax due has no effect on the income statement,but reduces cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 12

What is the effect of the accrual of interest expense on the elements of the financial statements?

Accepted Answer

A) Liabilities will increase and retained earnings will decrease. 
B) Assets and liabilities will decrease. 
C) Assets will increase and retained earnings will increase. 
D) Liabilities will increase and assets will decrease. 
A) Liabilities will increase and retained earnings will decrease. 
B) Assets and liabilities will decrease. 
C) Assets will increase and retained earnings will increase. 
D) Liabilities will increase and assets will decrease.

Question 13

Employers must withhold unemployment taxes from employee salaries.

Accepted Answer

A) True 
 B)False

Question 14

Indicate whether each of the following is true or false.Perez Company borrowed money from its bank in July Year 1.The accrual of interest on the loan at the end of Year 1:
________ a)reduces cash flows.
________ b)involves recognition of interest expense.
________ c)does not affect income for Year 1.
________ d)involves recognition of a liability.
________ e)records a cash payment for interest.

Accepted Answer

a)F b)T c)F d)T e)F
a)This is false.Adju

Question 15

Issuing a note payable is a(n):

Accepted Answer

A) Claims exchange transaction 
B) Asset source transaction 
C) Asset use transaction 
D) Asset exchange transaction 
A) Claims exchange transaction 
B) Asset source transaction 
C) Asset use transaction 
D) Asset exchange transaction

Question 16

A company with a high current ratio should be concerned that it is not maximizing its earnings potential.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not an item deducted from salary expense to arrive at net pay?

Accepted Answer

A) FICA tax for Social Security 
B) FICA tax for Medicare 
C) Federal unemployment tax 
D) These answer choices are all deducted from salary expense to arrive at net pay 
A) FICA tax for Social Security 
B) FICA tax for Medicare 
C) Federal unemployment tax 
D) These answer choices are all deducted from salary expense to arrive at net pay

Question 18

Which of the following statements is true regarding discount notes?

Accepted Answer

A) They are recorded in the account "notes payable" at more than face value on the day of issue. 
B) They are recorded in the account "notes payable" at face value on the day of issue. 
C) They are recorded in the account "notes payable" at less than face value on the day of issue. 
D) They are not recorded until the maturity date. 
A) They are recorded in the account "notes payable" at more than face value on the day of issue. 
B) They are recorded in the account "notes payable" at face value on the day of issue. 
C) They are recorded in the account "notes payable" at less than face value on the day of issue. 
D) They are not recorded until the maturity date.

Question 19

Recording an adjusting entry for product warranties is a claims exchange transaction.

Accepted Answer

A) True 
 B)False

Question 20

[The following information applies to the questions displayed below.]

Seattle Company issued a $90,000 face value discount note payable to First Federal Bank on September 1, Year 1. The note had a 4% discount rate and a one-year term.

-What is the amount of interest expense appearing on the Year 1 income statement?

Accepted Answer

A) $1,200 
B) $3,600 
C) $2,400 
D) $7,200 
A) $1,200 
B) $3,600 
C) $2,400 
D) $7,200

Independent contractors must be individuals who are employed by another company.

When do the effects of warranty obligations affect the statement of cash flows?

How does the going concern assumption affect accounting for notes payable?

Use the information on January 1,Year 1 to determine the effect of the following entry on the current ratio of Menendez Company: How will this transaction affect the current ratio?

Which of the following is a claims exchange transaction?

Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?

On October 1,Year 1,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a one-year term to maturity.On that date,Harrison recorded a Discount on Notes Payable in the amount of $1,920.

Monthly remittance of sales tax due has no effect on the income statement,but reduces cash flow from operating activities.

What is the effect of the accrual of interest expense on the elements of the financial statements?

Employers must withhold unemployment taxes from employee salaries.

Issuing a note payable is a(n):

A company with a high current ratio should be concerned that it is not maximizing its earnings potential.

Which of the following is not an item deducted from salary expense to arrive at net pay?

Which of the following statements is true regarding discount notes?

Recording an adjusting entry for product warranties is a claims exchange transaction.

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Financial Statement Analysis

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Exam 9: Accounting for Current Liabilities and Payroll

Independent contractors must be individuals who are employed by another company.

When do the effects of warranty obligations affect the statement of cash flows?

How does the going concern assumption affect accounting for notes payable?

Use the information on January 1,Year 1 to determine the effect of the following entry on the current ratio of Menendez Company: How will this transaction affect the current ratio?

Which of the following is a claims exchange transaction?

Which of the following happens as a result of selling $130 of merchandise to a customer for $200 cash in a state where the sales tax rate is 4%?

On October 1,Year 1,Harrison Company borrowed money by issuing a $24,000 face value discount note to its bank.The note had an 8% discount rate and had a one-year term to maturity.On that date,Harrison recorded a Discount on Notes Payable in the amount of $1,920.

Monthly remittance of sales tax due has no effect on the income statement,but reduces cash flow from operating activities.

What is the effect of the accrual of interest expense on the elements of the financial statements?

Employers must withhold unemployment taxes from employee salaries.

Issuing a note payable is a(n):

A company with a high current ratio should be concerned that it is not maximizing its earnings potential.

Which of the following is not an item deducted from salary expense to arrive at net pay?

Which of the following statements is true regarding discount notes?

Recording an adjusting entry for product warranties is a claims exchange transaction.

An Introduction to Accounting

Accounting for Accruals and Deferrals

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Financial Statement Analysis

Filters