Question 1

Livingston Organization had total assets of $635,000; total liabilities of $185,000; and total Stockholders' Equity of $450,000. Livingston's debt ratio is: (Round your final answer to the nearest whole number.)

Accepted Answer

A) 17%. 
B) 71%. 
C) 41%. 
D) 29%.

Question 2

Bonds that can be exchanged for stock are called:

Accepted Answer

A) callable bonds. 
B) serial bonds. 
C) debenture bonds. 
D) convertible bonds.

Question 3

Capital leases are most similar to:

Accepted Answer

A) Accounts Payable. 
B) unearned revenue. 
C) mortgage notes. 
D) regular Notes Payable.

Question 4

Warranty expense is always recorded in the period that the warranty claims are paid.

Accepted Answer

A) True 
 B)False

Question 5

When a liability exists, the amount owed is always known.

Accepted Answer

A) True 
 B)False

Question 6

With regard to long-term debt, collateral represents?

Accepted Answer

A) A long-term note payable secured with real estate 
B) A guarantee that a product is free from defect 
C) Assets pledged to secure repayment of a loan 
D) A long-term interest bearing note payable

Question 7

A company may use two payroll accounts as a control for efficiency.

Accepted Answer

A) True 
 B)False

Question 8

During the month, Evergreen Roofing settled $600 in warranty claims by replacing the defective flashing. Evergreen uses an estimated warranty account. The journal entry to record the settled claims would have been:

Accepted Answer

A) debit Estimated Warranty Payable $600; credit Cash $600. 
B) debit Estimated Warranty Payable $600; credit Inventory $600. 
C) debit Warranty Expense $600; credit Estimated Warranty Payable $600. 
D) debit Warranty Expense $600; credit Cash $600.

Question 9

The majority of a company's liabilities are estimated liabilities.

Accepted Answer

A) True 
 B)False

Question 10

TLR Productions reported Interest expense of $9,000, Income tax expense of $27,000 and Net income of $110,000. TLR's interest coverage ratio is: (Round your final answer to two decimal places.)

Accepted Answer

A) 15.222 
B) 16.222 
C) 0.062 
D) 0.066

Question 11

FUTA is paid by the employer on:

Accepted Answer

A) the first $106,800 of an employee's earnings. 
B) the first $8,000 of an employee's earnings. 
C) the first $7,000 of an employee's earnings. 
D) all of the employee's earnings.

Question 12

Sydney earns $15 per hour and works 40 hours a week. Last week she worked 50 hours; given that her company pays time and a half for overtime-what is Sydney's gross pay for the week? (Assume overtime is any time over 40 hours per week. Round intermediary calculations and your final answer to the nearest cent.)

Accepted Answer

A) $600.00 
B) $750.00 
C) $825.00 
D) $900.00

Question 13

KLR Oil Company is being investigated, following an explosion on one of their oil rigs. They have multiple prior citations for safety violations, and this explosion killed several workers. The related damages are still unknown and cannot be reasonably estimated. What accounting treatment should KLR use for the investigation?

Accepted Answer

A) Because damages are still unknown, no action is necessary. 
B) Because the likelihood of the obligation occurring is remote, footnote disclosure is all that is required. 
C) Because the likelihood of the obligation occurring is probable, but the amount is unknown, this should be disclosed in the footnotes. 
D) Because the likelihood of the obligation occurring is reasonably possible, this should be disclosed in the footnotes.

Question 14

Unearned revenues are typically classified as current liabilities.

Accepted Answer

A) True 
 B)False

Question 15

Cypress Corp. had sales on account of $19,500 which were subject to state sales tax of 12%. The entry to record the sales would be to:

Accepted Answer

A) debit Accounts Receivable $19,500; debit Sales Tax Payable $2,340; credit Sales Revenue $21,840. 
B) debit Accounts Receivable $21,840; credit Sales Revenue $19,500; credit Sales Tax Payable $2,340. 
C) debit Accounts Receivable $19,500; credit Sales Revenue $19,500. 
D) debit Accounts Receivable $21,840; credit Sales Revenue $21,840.

Question 16

Salary is pay stated at an hourly rate.

Accepted Answer

A) True 
 B)False

Question 17

Making a payment on an account would be journalized with a debit to Accounts Payable and credit to Cash.

Accepted Answer

A) True 
 B)False

Question 18

By NOT accruing warranty expense:

Accepted Answer

A) reported liabilities will be overstated and net income will be understated. 
B) reported expenses will be overstated and reported liabilities will be understated. 
C) reported liabilities will be understated and net income will be overstated. 
D) reported expenses will be understated and net income will be understated.

Question 19

Notes payable would be an example of a known liability.

Accepted Answer

A) True 
 B)False

Question 20

A transaction, such as a utility bill to be paid in 30 days, would be journalized with a debit to Utilities expense and a credit to Notes payable.

Accepted Answer

A) True 
 B)False

Exam 9: Current Liabilities and Long-Term Debt

Livingston Organization had total assets of $635,000; total liabilities of $185,000; and total Stockholders' Equity of $450,000. Livingston's debt ratio is: (Round your final answer to the nearest whole number.)

Bonds that can be exchanged for stock are called:

Capital leases are most similar to:

Warranty expense is always recorded in the period that the warranty claims are paid.

When a liability exists, the amount owed is always known.

With regard to long-term debt, collateral represents?

A company may use two payroll accounts as a control for efficiency.

During the month, Evergreen Roofing settled $600 in warranty claims by replacing the defective flashing. Evergreen uses an estimated warranty account. The journal entry to record the settled claims would have been:

The majority of a company's liabilities are estimated liabilities.

TLR Productions reported Interest expense of $9,000, Income tax expense of $27,000 and Net income of $110,000. TLR's interest coverage ratio is: (Round your final answer to two decimal places.)

FUTA is paid by the employer on:

Unearned revenues are typically classified as current liabilities.

Cypress Corp. had sales on account of $19,500 which were subject to state sales tax of 12%. The entry to record the sales would be to:

Salary is pay stated at an hourly rate.

Making a payment on an account would be journalized with a debit to Accounts Payable and credit to Cash.

By NOT accruing warranty expense:

Notes payable would be an example of a known liability.

A transaction, such as a utility bill to be paid in 30 days, would be journalized with a debit to Utilities expense and a credit to Notes payable.