Question 1

The Wage and Tax Statement,Form W-2,is sent to the employee annually to report earnings and withheld taxes.

Accepted Answer

A) True 
 B)False

Question 2

What type of account is Discount on Notes Payable?

Accepted Answer

A) Contra liability 
B) Liability 
C) Contra asset 
D) Expense 
A) Contra liability 
B) Liability 
C) Contra asset 
D) Expense

Question 3

What is the carrying value of the liability appearing on the December 31,Year 1 balance sheet?

Accepted Answer

A) $80,400 
B) $87,600 
C) $90,000 
D) $88,800 
A) $80,400 
B) $87,600 
C) $90,000 
D) $88,800

Question 4

Burger Barn has been named as a plaintiff in a $5 million lawsuit filed by a customer over the addictive nature of the company's burgers.Burger Barn's attorneys have advised them that the likelihood of a future obligation from the suit is remote.What should Burger Barn do as a result of the information that is available?

Accepted Answer

A) Disclose the lawsuit in the notes to the financial statements 
B) Recognize a $5 million liability on its balance sheet for the contingency 
C) Ignore the lawsuit in its financial statements 
D) Settle with the customer immediately for $5 million to avoid harmful publicity 
A) Disclose the lawsuit in the notes to the financial statements 
B) Recognize a $5 million liability on its balance sheet for the contingency 
C) Ignore the lawsuit in its financial statements 
D) Settle with the customer immediately for $5 million to avoid harmful publicity

Question 5

When calculating interest expense on a 6-month note,multiply the principal by the interest rate,and then multiply by (6 ÷ 12).

Accepted Answer

A) True 
 B)False

Question 6

How does the amortization of the discount on a note payable affect the elements of a company's financial statements?

Accepted Answer

A) Decreases interest expense and decreases liabilities 
B) Decreases interest expense and increases liabilities 
C) Increases interest expense and decreases liabilities 
D) Increases interest expense and increases liabilities 
A) Decreases interest expense and decreases liabilities 
B) Decreases interest expense and increases liabilities 
C) Increases interest expense and decreases liabilities 
D) Increases interest expense and increases liabilities

Question 7

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.What is the company's current ratio?

Accepted Answer

A) 0.69 to 1 
B) 1.44 to 1 
C) 1.16 to 1 
D) 3.26 to 1 
A) 0.69 to 1 
B) 1.44 to 1 
C) 1.16 to 1 
D) 3.26 to 1

Question 8

Vacation pay is considered a contingent liability.

Accepted Answer

A) True 
 B)False

Question 9

During Year 1,its first year of operations,Benitez Co.reported sales of $800,000.At the end of Year 1,the company estimated its warranty obligation at 3% of sales.During Year 1,the company paid $13,000 cash to settle warranty claims.Which of the following statements is true?

Accepted Answer

A) Warranty expenses would decrease net earnings by $24,000 in Year 1. 
B) Cash decreased by $13,000 as a result of the accounting events associated with warranties in Year 1. 
C) The warranties payable account has a credit balance of $11,000 at the end of Year 1. 
D) All of these answer choices are correct. 
A) Warranty expenses would decrease net earnings by $24,000 in Year 1. 
B) Cash decreased by $13,000 as a result of the accounting events associated with warranties in Year 1. 
C) The warranties payable account has a credit balance of $11,000 at the end of Year 1. 
D) All of these answer choices are correct.

Question 10

[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 recognition of the warranty obligation to the customer who purchased this merchandise on the elements of the Year 1 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 11

Joseph Company is preparing to repay a one-year note on May 1,Year 2.The first step in this process is to accrue eight months of interest expense.

Accepted Answer

A) True 
 B)False

Question 12

On September 1,Year 1,West Company borrowed $10,000 from Valley Bank.West agreed to pay interest annually at the rate of 6% per year.The note issued by West carried an 18-month term.West Company has a calendar year-end.What is the amount of interest expense that will be reported on West's income statement for Year 1?

Accepted Answer

A) $-0- 
B) $150 
C) $60 
D) $200 
A) $-0- 
B) $150 
C) $60 
D) $200

Question 13

FICA taxes are recorded both as salary expense and as payroll tax expense.

Accepted Answer

A) True 
 B)False

Question 14

Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet?

Accepted Answer

A) The amount can be reasonably estimated. 
B) The outcome is probable. 
C) The outcome is reasonably possible. 
D) The outcome is probable and can be reasonably estimated. 
A) The amount can be reasonably estimated. 
B) The outcome is probable. 
C) The outcome is reasonably possible. 
D) The outcome is probable and can be reasonably estimated.

Question 15

If a company offers a warranty on the products it sells,the company records the warranty expense at the time that service is provided to customers under the terms of the warranty.

Accepted Answer

A) True 
 B)False

Question 16

What is the current ratio used to evaluate?

Accepted Answer

A) Solvency 
B) Liquidity 
C) Equity 
D) Profitability 
A) Solvency 
B) Liquidity 
C) Equity 
D) Profitability

Question 17

The issuer of a note payable is also known as the maker.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following describes the effect of remitting the sales tax to the tax authority?

Accepted Answer

A) Decreases liabilities. 
B) A claims exchange transaction. 
C) Decreases stockholders' equity. 
D) All of these answer choices are correct. 
A) Decreases liabilities. 
B) A claims exchange transaction. 
C) Decreases stockholders' equity. 
D) All of these answer choices are correct.

Question 19

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

Madison Company issued an interest-bearing note payable with a face value of $24,000 and a stated interest rate of 8% to Metropolitan Bank on August 1, Year 1. The note carried a one-year term.

-Based on this information alone,what is the amount of total liabilities appearing on Madison's balance sheet as of December 31,Year 1?

Accepted Answer

A) $24,720 
B) $24,800 
C) $25,920 
D) $24,000 
A) $24,720 
B) $24,800 
C) $25,920 
D) $24,000

Question 20

How is the current ratio calculated?

Accepted Answer

A) Current assets divided by total assets 
B) Current assets minus current liabilities 
C) Current assets divided by current liabilities 
D) Retained earnings divided by current liabilities 
A) Current assets divided by total assets 
B) Current assets minus current liabilities 
C) Current assets divided by current liabilities 
D) Retained earnings divided by current liabilities

The Wage and Tax Statement,Form W-2,is sent to the employee annually to report earnings and withheld taxes.

What type of account is Discount on Notes Payable?

What is the carrying value of the liability appearing on the December 31,Year 1 balance sheet?

When calculating interest expense on a 6-month note,multiply the principal by the interest rate,and then multiply by (6 ÷ 12).

How does the amortization of the discount on a note payable affect the elements of a company's financial statements?

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.What is the company's current ratio?

Vacation pay is considered a contingent liability.

During Year 1,its first year of operations,Benitez Co.reported sales of $800,000.At the end of Year 1,the company estimated its warranty obligation at 3% of sales.During Year 1,the company paid $13,000 cash to settle warranty claims.Which of the following statements is true?

Joseph Company is preparing to repay a one-year note on May 1,Year 2.The first step in this process is to accrue eight months of interest expense.

FICA taxes are recorded both as salary expense and as payroll tax expense.

Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet?

If a company offers a warranty on the products it sells,the company records the warranty expense at the time that service is provided to customers under the terms of the warranty.

What is the current ratio used to evaluate?

The issuer of a note payable is also known as the maker.

Which of the following describes the effect of remitting the sales tax to the tax authority?

How is the current ratio calculated?

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

The Wage and Tax Statement,Form W-2,is sent to the employee annually to report earnings and withheld taxes.

What type of account is Discount on Notes Payable?

What is the carrying value of the liability appearing on the December 31,Year 1 balance sheet?

When calculating interest expense on a 6-month note,multiply the principal by the interest rate,and then multiply by (6 ÷ 12).

How does the amortization of the discount on a note payable affect the elements of a company's financial statements?

A company's classified balance sheet shows current assets of $8,650 and current liabilities of $6,000.What is the company's current ratio?

Vacation pay is considered a contingent liability.

During Year 1,its first year of operations,Benitez Co.reported sales of $800,000.At the end of Year 1,the company estimated its warranty obligation at 3% of sales.During Year 1,the company paid $13,000 cash to settle warranty claims.Which of the following statements is true?

Joseph Company is preparing to repay a one-year note on May 1,Year 2.The first step in this process is to accrue eight months of interest expense.

FICA taxes are recorded both as salary expense and as payroll tax expense.

Under what condition should a pending lawsuit be recognized as a liability on a company's balance sheet?

If a company offers a warranty on the products it sells,the company records the warranty expense at the time that service is provided to customers under the terms of the warranty.

What is the current ratio used to evaluate?

The issuer of a note payable is also known as the maker.

Which of the following describes the effect of remitting the sales tax to the tax authority?

How is the current ratio calculated?

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